AYO’s remuneration philosophy is anchored around the governance principles of the King Report. The Total Reward principles form the cornerstone of our employee value proposition, designed to attract, develop, engage, motivate and retain rare critical skills as well as underpin our human capital philosophy of “growing own timber”.

We look at remuneration holistically to create a unique combination of career and growth opportunities, recognition, culture and values, compensation and benefits and work environment. This allows us to leverage the proper mix of rewards to satisfy personal and financial needs of current and potential workforce given our business conditions, operating context and cost constraints. Our main aim is to ensure that the company is able to develop, motivate and maintain an internal human capital pipeline and as necessary attract the requisite skills from the labour market to enable our business growth strategy.

The company’s remuneration policy was reviewed during the 2019 financial year and is aligned with the relevant principles in King IV™ Code and that it promotes good governance, our shared values and ethics. Reporting and disclosures continue to evolve to ensure that the policy is transparent to all stakeholders.

AYO’s remuneration policy, adopted in June 2019, includes performance targets and key measures to ensure alignment with the Group’s strategic objectives as well as fairness, transparency, internal equity and external competitiveness. Introduction of shortterm and long-term incentives were also proposed.

The policy is a continuous work in progress document. This and the committee’s implementation report will be presented to shareholders for separate non-binding advisory votes at the Company’s AGM. In the event that less than 75% support for these reports is achieved at the AGM, AYO will invite dissenting shareholders to submit reasons for such votes in writing, where after further engagement may be scheduled.

Remuneration comprises of a total guaranteed package, bonus payments, short-term incentives and long-term incentives.

AYO’s guaranteed pay, referred to as the Total Guaranteed Package (TGP), is calculated on the total cost to company method and is inclusive of company contribution for selected benefits.

In August 2019 the TGP of all permanent employees and executives was increased by 7% in accordance with market movement, forecast inflation and affordability. One of the committee’s key tasks is to ensure the relevance, integrity and consistency of AYO’s remuneration offering as it is seen as an essential pillar of our total employee value proposition.

A review was done on the benefits included in the TGP and recommendations have been formulated particularly with regards to medical aid contributions and maternity benefits. Currently medical aid membership is compulsory for full-time employees with contribution payable towards it by the Company. It is recommended that the policy is amended to make medical aid membership voluntary, which will have no financial impact on the Company but will allow staff the choice to join or not based on their circumstances. Maternity leave policy updates refer to increase of the benefits paid to mothers from the current third of her salary for the first three months to full salary being paid for two months for mothers who have been with the Company for less than two years and full salary for three months for mothers employed by AYO for two years or more.

A bonus payment equivalent to one month’s TGP is paid to all staff in the employ of the Company in December.

A formal short-term incentive (STI) scheme was adopted in 2019 designed to support and reinforce desired behaviour and delivery throughout the organisation. The STI performance scheme incorporates the following key pillars to adequately address various aspects of the strategy execution:

• Financial performance metrics;
• Operational efficiency metrics;
• Sustainability metrics;
• Delivery of strategic initiatives.

The STI rates are determined relative to the annual TGP package at the end of August each year. The amount is then paid in cash in December of the same year. The cycle leading up to the payment of the incentives starts in March with forecast of the results at year-end, determination and approval of bonus tiers payable, estimation of the provision to be raised at the end of the financial year and refinement of the target metrics numbers once the external auditors have finalised the audited financial results.

The Group’s STI targets are determined by the committee, agreed with EXCO and senior management and thereafter approved by the Board. The target weightings have been set reasonably high at executive level to drive problem-solving through collaboration and teamwork across the Group while ensuring alignment of objectives across the Group, thereby realising the benefits of the operating model and tangible value creation for stakeholders.

For the 2018 and 2019 financial years no long-term incentives (LTI) were paid to executive directors.

A new LTI compensation scheme has been drafted during the reporting period, designed to reward performance based on the achievement of the Group’s long-term financial goals and aligning the interest of management with that of shareholders. The new scheme is aimed at eligible employees in management and core critical specialist level and is proposed to the Board for review.

Executive directors at AYO are employees and have standard employment contracts with the Company. Their basic remuneration package is decided at the Nominations Committee when appointing the executive. All incentives and bonuses are decided by the remuneration committee within the guidelines of the remuneration policy.

For the 2019 financial year remuneration received by executive directors was as follows:

Payments made by the Company on termination of office during the financial year amounted to R880 000.

Non-executive directors do not have employment contracts with the Company, nor do they benefit from the Company’s performance schemes. They have Board appointment letters and are paid a fee for participating in and attending Board meetings. Non-executive directors who perform services through Board Committees are paid additional basic and attendance fees for such services. No arrangement exists for compensation in respect of loss of office. Board fees and fee structures are also reviewed annually.

The committee has received a recommendation to adjust the fees payable to non-executive directors’ proposal to reflect the number of ad hoc meetings that have required their attendance and thought.

Such ad hoc meetings are not currently accounted for in their fee structure. The committee will table this aspect to the Board for further discussion.