PKP CARGO - diversity and remuneration system

Diversity policy

In the Company, no formal diversity policy has been prepared with regard to the Company’s corporate bodies; nevertheless, the policy carried out by the Company in all the processes, especially recruitment, takes into consideration such diversity aspects as sex, education, age and professional experience, accepting diversity and equal opportunities as significant competitive advantages, which make it possible to win and retain talented employees and benefit from their professional capacity.

PKP S.A. is authorized to appoint and dismiss Supervisory Board Members in a number equal to half the composition of the Supervisory Board. At least one of the Supervisory Board members appointed by PKP S.A. complies with the conditions of independence within the meaning of the Act on Statutory Auditors, Audit Firms and Public Oversight (Journal of Laws of 2017, item 1089) and is qualified in accounting or auditing.

The Company’s employees are entitled to appoint and dismiss three employee representatives to the Supervisory Board. The rules and regulations for running elections for candidates to become an employee representative in the PKP CARGO S.A. Management Board and to appoint employee representatives to the PKP CARGO S.A. Supervisory Board and the procedure for their removal were adopted by the Supervisory Board with resolution on 30 March 2016. A failure to elect the Supervisory Board members representing the employees does not prevent the Supervisory Board from being appointed or from adopting effective resolutions.

Independent PKP CARGO S.A. Supervisory Board Members satisfy the independence criteria for Supervisory Board Members defined by the European Commission in Annex II to the Commission Recommendation of 15 February 2005 and additional requirements specified in the “Best Practice of GPW Listed Companies 2016”.

Remuneration system in PKP CARGO S.A.

In PKP CARGO S.A., the compensation rules are established in accordance with the generally applicable laws and internal regulations in force in the Company.

These employees’ compensation consists of fixed and variable elements, depending on their position.

Fixed compensation components include basic compensation, special duty allowance and seniority allowance. Variable compensation components include allowances for work in conditions that are detrimental to health, burdensome and hazardous, for overtime work, for work on Sundays and holidays, for work during night, allowance for kilometers and allowance for one-person traction service.

In addition, the employees who receive compensation under the Company Collective Bargaining Agreement are eligible for monthly bonus paid according to the company bonus payment rules. The bonus fund includes a pool of funds earmarked for payment of bonuses for ongoing performance of tasks and for payment of bonuses to the employees for individual achievements.

Pursuant to the delegation contained in the Company Collective Bargaining Agreement, the employees of the Company’s Headquarters and the employees on management and independent positions in the Company’s work establishments, who in 2018 represented 16.16% of total number of employees, receive their compensation based on the principles defined in the Resolution adopted by the PKP CARGO S.A. Management Board based on the individual wage coefficient appropriate for the job and the average monthly wage in the enterprise sector published by the Central Statistical Office (GUS).

The employees receiving compensation under the Resolution adopted by the PKP CARGO S.A. Management Board may be paid, depending on their position, the quarterly discretionary bonus, which is disbursed if the Company’s business goals are achieved to a specified degree, or annual bonus based on the Management Through Objectives Program in place in PKP CARGO S.A. if the Program is launched in the given year.

In addition, the compensation system includes, among others, the following benefits and perks: jubilee award, disability severance pay, retirement severance pay, coal allowance in the form of cash equivalent, benefits in the form of passenger train tickets, a benefit paid on the occasion of the Railway Employee Day, additional holidays for which employees on certain positions are eligible.

In connection with the IPO of PKP CARGO S.A.’s shares on the Warsaw Stock Exchange, on 2 September 2013 the Employee Guarantee Package (“Package”) was adopted by the signatories of the Company Collective Bargaining Agreement, which has a significant impact on the performance of the Company’s HR policy.

Under the agreements entered into between the PKP CARGO S.A. Management Board and the Trade Unions operating in the Company, a pilot project of quarterly task bonuses for Q4 2018 for all Company employees was launched. A bonus may be granted if the tasks for the whole Company and individual tasks of the Head Office department or the Company’s unit have been performed.

The quarterly task bonus program for Q4 2018 is a pilot project. Therefore, if it is evaluated favorably by the Social Partners, it will serve as the basis for developing a permanent solution the objective of which will be to strengthen the incentive function of the PKP CARGO S.A. employee compensation system by creating a framework for rewarding employees for the completion of assigned tasks and achieving the Company’s targets.

As part of the non-compensation incentive system for employees, a program of additional fringe benefits in the form of discounts on cultural events, goods or services for all employees of PKP CARGO S.A. was introduced. The Company’s offer of discounts and rebates on products and services is more attractive than what is available on the open market. The employer makes sure that in terms of geolocation its offer is available to the largest possible number of employees. Employees are informed about the offer through such communication channels as the Intranet, e-mail, local messages and newsletter distributed in electronic and paper form.

The broadly construed employee compensation system also covers the rules for compensating key management, i.e. PKP CARGO S.A. Supervisory Board Members, Management Board Members, directors of the Head Office departments and directors of the Company’s Units. These rules constitute an internal element of the corporate governance principles in effect in PKP CARGO S.A. established in accordance with the generally applicable laws and internal regulations in force in the Company, including in particular the provisions of the Articles of Association, the Bylaws of the Shareholder Meeting, the Bylaws and Resolutions of the Supervisory Board and the Bylaws of the Management Board.

This document contains a collection of general rules for compensating key management and constitutes an important element of the development and safety of PKP CARGO S.A., and its main objective is to support the strategies aimed at achieving the Company’s assumed business goals.