6.3.6Employee Benefit Expenses

Information with respect to employee benefits expenses are detailed as follows:

Employee benefit expenses

Note

2015

2014

Wages and salaries

(428)

(506)

Social security costs

(53)

(67)

Contributions to defined contribution plans

(32)

(42)

(Increase)/decrease in liability for defined benefit plans

(3)

(2)

(Increase)/decrease in liability for other long term benefits

1

2

Share-based payment cost

-

(24)

Other employee benefits

(189)

(223)

Total employee benefits

6.3.5

(704)

(861)

Employee benefit expenses came down during the period following the workforce reduction which ranged 600 positions over the period 2014 to 2015.

Other employee benefits include, for the most part, expenses related to contractor’s staff, not on the Company’s payroll, training and travel costs.

Defined contribution Plan

The contributions to defined contribution plans includes the Company participation in the Merchant Navy Officers Pension Fund (MNOPF). The MNOPF is a defined benefit multi-employer plan which is closed to new members. The fund is managed by a corporate Trustee, MNOPF Trustees Limited, and provides defined benefits for nearly 27.000 Merchant Navy Officers and their dependents out of which approximately 100 SBM Offshore former employees.

The Trustee apportions its funding deficit between Participating Employers, based on the portions of the Fund’s liabilities which were originally accrued by members in service with each employer. When the Trustee determined that contributions are unlikely to be recovered from a Participating Employer, it can re-apportion the deficit contributions to other Participating Employers.

Entities participating in the MNOPF are exposed to the actuarial risk associated with the current and former employees of other entities through exposure to their share of the deficit those other entities default. As there is only a notional allocation of assets and liabilities to any employer, the Company is accounting for the MNOPF in its financial statements as if it were a defined contribution scheme. A contribution in respect of the section 75 debt certified as at 28 February 2014 of GBP 2,366,650 is due in 2016. Other than this, there are no further contributions agreed at present.

Defined benefit plans and other long term benefits

The employee benefits provisions recognized in accordance with accounting principles, relate to:

Note

2015

2014

Pension plan

12

12

Lump sums on retirement

6

8

Defined benefit plans

18

20

Long-service awards

11

12

Other long term benefits

11

12

Employee benefits provisions

6.3.26

29

32

The defined benefit plan provision is partially funded as follows:

Benefit asset/liability included in the statement of financial position

2015

2014

Pension plans

Lump sums on retirement

Total

Pension plans

Lump sums on retirement

Total

Defined benefit obligation

59

6

66

65

8

73

Fair value of plan assets

(48)

-

(48)

(53)

-

(53)

Benefit (asset)/liability

12

6

18

12

8

20

The main assumptions used in determining employee benefit obligations for the Company’s plans are shown below:

Main assumptions used in determining employee benefit obligations

in %

2015

2014

Discount rate

0.75 - 2.08

1.00 - 1.80

Inflation rate

2.00

2.00

Expected rate of return on assets

1.00

2.00

Future salary increases

3.00

3.00

Future pension increases

-

-

The overall expected rate of return on assets is determined on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The following table summarizes the components of net benefit expense recognized in the consolidated income statement regarding the defined benefits provisions.

Net benefit expense recognised within employee benefits

2015

2014

Current service cost

2

2

Interest cost on benefit obligation

1

2

Expected return on plan assets

0

(1)

Other

-

0

Net benefit expense

3

2

Changes in the present value of the defined benefit obligations and the plan assets are as follows:

Changes in the defined benefit obligation

2015

2014

Opening defined benefit obligation

73

76

Current service cost

2

2

Interest cost

1

2

Benefits paid

(3)

(4)

Actuarial (gains)/losses

2

6

Other movements

(2)

0

Exchange differences on foreign plans

(8)

(9)

Closing defined benefit obligation at 31 December

66

73

Changes in the fair value of plan assets

2015

2014

Opening fair value of plan assets

(53)

(60)

Expected return

-

(1)

Contributions by employer

0

0

Contribution by employee

0

0

Benefits paid

3

3

Actuarial (gains)/losses arising from experience adjustment

(2)

(1)

Other movements

0

0

Exchange differences on foreign plans

5

7

Closing fair value of plan assets at 31 December

(48)

(53)

The actual return on plan assets is US$ 2.9 million (2014 : US$ 2 million).

The breakdown of plan assets by type of investments is as follows:

Breakdown of plan asset by type of investment

in %

2015

2014

Cash

7

7

Real estate

5

5

Alternative investments

15

4

Equities

25

29

Bonds

48

55

100

100

Reasonably possible changes at the reporting date of one of the relevant actuarial assumptions holding other assumptions constant would have affected the defined benefit obligation by the amounts shown below:

Sensitivity analysis on the defined benedit obligation due to a change in the discount rate

in % of the year-end defined benefit obligation

Pension plans

Lump sums on retirement

+0.5% movement

(7.0)

(8.0)

-0.5% movement

8.0

9.0

Remuneration Key Management Personnel of the Company

The remuneration of key management personnel of the Company paid during the year, including pension costs and performance related Short Term Incentives (STI), amounted to US$ 19 million (2014: US$ 20 million). Details on KPI's can be found in section 4.4.2 of the Annual Report.

The performance-related part of the remuneration, comprising both STI and LTI components, equals 59% (2014: 65%). The remuneration (including the Management Board’s remuneration which is euro denominated), was affected by the strengthening US$ in 2015 (16.5% lower average rate as in 2014).

The total remuneration and associated costs of the Managing Directors and other key management personnel (non-statutory directors and management of the main subsidiaries) is specified as follows:

2015 remuneration key management personnel (on accrual basis)

in thousands of US$

Base salary

STI 1

Other 2

Pensions 3

Sharebased compensation 4

Total remuneration 5

Bruno Chabas

2015

888

1,664

455

247

1,791

5,045

2014

1,063

2,126

189

304

2,786

6,468

Peter van Rossum

2015

5796

888

260

145

744

2,616

2014

654

981

257

164

1,446

3,501

Sietze Hepkema

2015 (till 15/4)

191

264

8

38

1,008

1,509

2014

784

1,176

156

157

1,774

4,047

Philippe Barril

2015 (from 1/3)

509

738

3987

127

358

2,130

2014

-

Erik Lagendijk

2015

454

638

17

113

200

1,422

2014

-

Other key personnel

2015

2,370

1,381

907

111

1,631

6,400

2014

2,426

1,399

881

65

1,739

6,510

Total 2015

4,991

5,573

2,045

781

5,732

19,122

Total 2014

4,926

5,682

1,483

689

7,744

20,525

  • 1 this represents the actual STI approved by the Supervisory Board, which has been accrued over the calendar year, payment of which will be made in the following year.
  • 2 consisting of social charges, lease car expenses, and other allowances, a.o. in connection with the headquarter move, such as housing allowance, settling-in allowance.
  • 3 representing company contributions to Board member pensions; in the absence of a qualifying pension scheme such contribution is paid gross, withholding wage tax at source borne by the individuals.
  • 4 this amount represents the period allocation to the calendar year of vesting costs of all unvested share-based incentives (notably 'LTI' - Long Term Incentive -, matching 'STI' -Short Term Incentive - shares and share part of sign-on bonus COO), in accordance with IFRS2 rules.
  • 5 for the Management Board this represents the actual STI approved by the Supervisory Board, which has been accrued over the calendar year, payment of which will be made in the following year (for other key personnel this represents STI paid in the year).
  • 6 salary increase from 1 July 2015.
  • 7 including cash part of the sign-on bonus (as per Agenda item 11 to AGM of 15 April 2015).

The table above represents the total remuneration in US$, being the reporting currency of the Company. For underlying total remuneration in € (currency of payment), reference is made to Remuneration Report (section 4.4 of the Annual Report).

Short term Incentive Program Management Board

The Short Term Incentive program includes three sets of Performance Indicators as noted below.

  • Company performance, which determines 50% to 75% of any potential reward;
  • The individual performance of the Management Board member, which determines the remaining 25% to 50%; and
  • A Corporate Social Responsibiliy & Quality Multiplier consisting of safety and quality performance measures and the Dow Jones Sustainability Index score. This factor can cause a 10% uplift or reduction of the total Short Term Incentive. However, in case 100% of the company and personal indicators have been realized, the multiplier will not provide an additional uplift.

For 2015, the Supervisory Board concluded that the Management Board members performed well above Target for their individual performance indicators as set for 2015. The Company’s performance indicator against the net debt indicator was in between Target and Maximum. The personal and the company performance together resulted in performance of 171% of salary for the CEO and between 128-132% for the other Management Board members. As for the safety/quality/sustainability multiplier, the Supervisory Board assessed that the performance indicators were met at maximum, resulting in an additional 10% uplift in the Short Term Incentive pay-out. The total performance under the STI resulted in 188% for the CEO and 140-145% for the other Management Board members.

Performance Shares Management Board

Under the Remuneration Policy 2011, the LTI for the members of the former Board of Management and current Management Board consists of shares which are subject to performance conditions. Performance indicators are EPS growth, and relative Total Shareholder Return (TSR); under the amended Remuneration Policy (RP 2011 aa) a special incentive based on the achievement of specific pre-defined objectives as determined by the Supervisory Board was added, within the absolute maximum award level. Performance shares vest three years after the provisional award date, and must be retained for two years from the vesting date.

For the performance period 2013-2015, both EPS and TSR performance indicators came in at maximum, resulting in the total LTI vesting at the maximum.

From 2015 onwards, the number of conditional performance shares awarded is based upon the principles of the Share Pool, introduced in the Remuneration Policy 2015, and adopted by the AGM in 2014. The conditional awards in 2015, assuming “At target” performance, were 83,878 shares for the CEO, and 55,919 for each of the other Managing Directors.

The main assumptions included in the calculation for the LTI 2015 award are:

2015 awards − Fair values

2015

PSU - TSR - CEO

€ 14.78

PSU - TSR - other MB

€ 11.31

PSU - EPS

€ 11.51

The parameters underlying the 2015 PSU fair values are: a share price at the grant date of € 11.51 (14 April 2015), volatility of 39%, risk free interest rate 0.0% (negative Dutch governance bond rate) and a dividend yield of 0.0%.

Performance Share Unit (PSU) and Restricted Share Unit (RSU) plans

These plans were introduced in 2009, approved by the Supervisory Board and implemented, replacing the previous Share Option Plan for senior employees. Since 2011, only RSU has been awarded. Under these plans, shares in the Company are awarded annually to eligible employees. The number of shares granted under the regular RSU plan in 2015 is 977,500 (2014: 1,100.720). Furthermore, in 2015 special RSU shares were granted in the context of the headquarter move to Amsterdam (105,000) and for skills retention purposes (233,000). A further 50,000 RSUs were granted to Mr. Ph. Barril as a sign-on premium.

The annual award is based on individual performance. The RSU plans have no performance condition, only a service condition, and will vest as follows:

  • regular RSU: over a three year period, with 1/3 vesting on each anniversary date of the original grant date;
  • additional RSU: at the end of three year continuing service. Upon vesting these shares are subject to a further two year lock-up period.
  • relocation and skills retention: at the end of two year continuing service;
  • sign-on RSU awarded in 2015: at the end of three year continuing service.

Main assumptions included in the calculation for the PSU and RSU plans are:

2015 awards – Fair values

2015

Regular, relocation and skills retention RSU (Share price as at 1 July 2015)

€ 10.71

Sign-on RSU Mr. Barril (share price as at 1 March 2015)

€ 10.50

RSU is valued at a share price at grant date, applying the Black & Scholes model. For Regular, relocation and skills retention RSU an average annual forfeiture of 2.5% is taken in account.

Matching Shares

Under the STI plans for the Management Board, management and senior staff of Group companies, 20% of the STI is or can be paid in shares. For Management Board members, this share based element is compulsory (from 2015 onwards the STI plan is 100% cash settled, and matching shares will no longer apply) but for other senior staff the scheme is optional. Subject to a vesting period of three years, an identical number of shares (matching shares) will be issued to participants. Assumed probability of vesting amounts to 100% for the Management Board and 95% for other senior staff.

Main assumptions included in the calculation for the matching shares are:

2015 awards − Fair values

2015

STI matching shares

€ 9.76

Total Share-Based Payment Costs

The amounts recognized in EBIT for all share-based payment transactions are summarized as follows, taking into account both the provisional awards for the current year and the additional awards related to prior years, as well as true-up (in thousands of US$):

2015

Performance shares and RSU/PSU

Matching
shares

Total

Instruments granted

13,864

1,613

15,477

Performance conditions

3,572

545

4,117

Total expenses 2015

17,436

2,158

19,594

2014

Performance shares and RSU/PSU

Matching
shares

Total

Instruments granted

15,667

1,404

17,071

Performance conditions

6,170

393

6,563

Total expenses 2014

21,837

1,797

23,634

Rules of conduct with regard to inside information are in place to ensure compliance with the Act on Financial Supervision. These rules forbid e.g. the exercise of options or other financial instruments during certain periods defined in the rules and more specifically when the employee is in possession of price sensitive information.

Remuneration of the Supervisory Board

The remuneration of the Supervisory Board amounted to US$ 822,000 (2014: US$ 776,000) and can be specified as follows:

2015

2014

in thousands of US$

Basic remuneration

Committees

Total

Basic remuneration

Committees

Total

F.J.G.M. Cremers - Chairman (from 15 April 2015)

120

17

137

106

13

119

T.M.E. Ehret - Vice-chairman (from 15 April 2015)

87

11

98

100

13

113

L.A. Armstrong

83

15

98

50

5

55

F.G.H. Deckers

83

19

102

100

18

118

F.R. Gugen

83

13

96

100

19

119

S. Hepkema (from 15 April 2015)

59

6

65

-

-

-

L.B.L.E. Mulliez (from 15 April 2015)

59

-

59

-

-

-

K.A. Rethy (until 15 April 2015)

35

3

38

100

15

115

C.D. Richard (from 15 April 2015)

87

-

87

-

-

-

H.C. Rothermund - Chairman (until 15 April 2015)

39

3

42

120

17

137

Total

735

87

822

676

100

776

There are no share-based incentives granted and no assets available to the members of the Supervisory Board. There are neither loans outstanding to the members of the Supervisory Board nor guarantees given on behalf of members of the Supervisory Board.

Number of Employees


Number of employees (by operating segment)

2015

2014

By operating segment:

Average

Year-end

Average

Year-end

Lease and operate

1,624

1,560

1,560

1,686

Turnkey

2,262

2,069

2,598

2,455

Other

361

286

407

436

Total excluding employees working for JVs and associates

4,247

3,915

4,565

4,577

Employees working for JVs and associates

3,053

2,385

3,765

3,723

Total

7,300

6,300

8,330

8,300

Number of employees (by geographical area)

2015

2014

By geographical area:

Average

Year-end

Average

Year-end

Netherlands

390

373

420

407

Worldwide

3,857

3,542

4,145

4,170

Total excluding employees working for JVs and associates

4,247

3,915

4,565

4,577

Employees working for JVs and associates

3,053

2,385

3,765

3,723

Total

7,300

6,300

8,330

8,300

The figures exclude fleet personnel hired through crewing agencies as well as other agency and freelance staff for whom expenses are included within other employee benefits.