Note 7: Employee benefits

The average number of employees working outside the Netherlands was 30,700 (2019: 31,900).

In 2020, the number of employees decreased by 5% to 32,200 people (year-end 2019: 33,800 people). Acquisitions in 2020 added around 250 people.

Employee benefit costs in 2020 include an €33 million compensation related to government support measures for COVID-19, mainly in China and the UK. These grants were mainly provided in the form of (partial) compensations for costs of salaries and wages, waivers of social charges and postponement of payment of indirect and corporate income taxes. AkzoNobel did not submit any application for the ‘Noodmaatregel Overbrugging voor Werkgelegenheid (NOW)’ in the Netherlands.

Share-based compensation

Share-based compensation relates to the equity-settled performance-related share plan and the restricted share plan, as well as the share-matching plan. Charges recognized in the 2020 statement of income for share-based compensation amounted to €14 million and are included in salaries and wages (2019: €16 million).

Performance-related and restricted share plan

Under the performance-related share plan and the restricted share plan, a number of conditional shares are granted to the members of the Board of Management, members of the Executive Committee and executives each year. The number of participants of the performance-related share plan and the restricted share plan at year-end 2020 was 289 (2019: 294). The shares of the performance-related share plan series 2017-2019 have vested and were delivered to the participants in 2020.

The performance targets for the conditional grant of performance shares for the Board of Management and the Executive Committee is linked for 50% to the relative TSR performance of the company compared with the peer group and for 50% to the ROI performance of the company, after which a two-year holding restriction will apply.

The plan for the executives is a restricted share plan without any performance conditions, whereby the conditional grant of shares will vest upon the condition that the executives remain in service with the company during the three-year vesting period, after which a one-year holding restriction applies.

The conditional shares of the 2018-2020 performance share plan for the AkzoNobel participants vested for 78% (series 2017-2019: 85%), including extraordinary dividend shares of 14.37% (series 2017-2019: 11.37%), the final vesting percentage amounted to 89.21% (series 2017-2019: 94.66%).

The share price of a common AkzoNobel share at year-end 2020 amounted to €87.86 (2019: €90.64).

Fair value of restricted and performance-related shares

The fair value of the restricted shares of the 2020-2022 grant, amounting to €64.83, is based on the share price on March 11, 2020 of €69.73 and the expected dividend yield of 2.40%. The fair value of the performance-related shares of the 2020-2022 grant is for 50% based on a market condition (TSR) and for 50% based on non-market-based performance condition (ROI).

The TSR part of the award is valued applying a Monte Carlo simulation model and the other part is valued based on the share price at grant date. The parameters applied for the fair value calculations are: share price at grant date (opening of first trading date from grant date), expected volatility (based on the share price development over the past three years of AkzoNobel), and risk-free interest rate (based on a Dutch zero-coupon government bond).

Share-matching plan

The members of the Board of Management and the members of the Executive Committee are eligible to participate in the share-matching plan. However, they will not be eligible for matching shares for the years 2019, 2020 and 2021. Under certain conditions, members who invest part of their short-term incentive in AkzoNobel shares may have such shares matched by the company. During 2020, 3,361 potential matching shares were matched, leading to a total of 1,720 potential matching shares on December 31, 2020. For an overview of the matching shares outstanding for the members of the Board of Management per December 31, 2020, we refer to the Remuneration report.