Note 7: Employee benefits

Salaries, wages and other employee benefits in operating income

In € millions

2019

2020

Salaries and wages

(1,461)

(1,449)

Post-retirement cost

(137)

(138)

Other social charges

(277)

(263)

Total

(1,875)

(1,850)

Average number of employees of total AkzoNobel*

Average number during the year

2019

2020

Decorative Paints

12,900

12,100

Performance Coatings

18,000

17,500

Corporate and other

3,300

3,400

Total

34,200

33,000

*

As a result of an organizational redesign completed in 2020, the 2019 employee numbers have been restated to reflect this change.

Average number of employees in the Netherlands*

Average number during the year

2019

2020

Decorative Paints

600

600

Performance Coatings

1,000

1,000

Corporate and other

700

700

Total

2,300

2,300

*

As a result of an organizational redesign completed in 2020, the 2019 employee numbers have been restated to reflect this change.

Employees*

At year-end

2019

2020

Decorative Paints

12,500

11,900

Performance Coatings

18,000

17,100

Corporate and other

3,300

3,200

Total

33,800

32,200

*

As a result of an organizational redesign completed in 2020, the 2019 employee numbers have been restated to reflect this change.

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 performance of the company compared with the peer group and for 50% to the 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 plans of AkzoNobel executives

Plan

Performance/Vesting period

Award
date

End of performance period

End of holding period

Balance at January 1, 2020

Awarded
in 2020

Vested in 2020

Forfeited in 2020

Dividend in 2020

Subject to performance condition

Unvested in 2020

Subject to holding period

Balance at December 31, 2020

2017-2019 Perfor­mance Share Plan

3 years

Jan 1, 2017

Jan 1, 2020

NA

211,968

(211,956)

(12)

2017-2019 Perfor­mance Share Plan

3 years

Jan 1, 2017

Jan 1, 2020

Feb 12, 2022

70,332

(70,332)

 

70,332

2018-2020 Restricted Share Plan

3 years

Jan 1, 2018

Jan 1, 2021

Jan 1, 2022

179,685

3,843

(521)

(15,987)

NA

167,020

167,020

167,020

2018-2020 Perfor­mance Share Plan

3 years

Jan 1, 2018

Jan 1, 2021

Feb 17, 2023

90,354

(8,600)

(14,123)

2,403

70,034

70,034

70,034

70,034

2019-2021 Restricted Share Plan

3 years

Jan 1, 2019

Jan 1, 2022

Jan 1, 2023

204,853

6,855

(328)

(24,510)

NA

186,870

186,870

186,870

2019-2021 Perfor­mance Share Plan

3 years

Jan 1, 2019

Jan 1, 2022

Feb 2024

94,691

(9,135)

(12,544)

2,519

75,531

75,531

75,531

75,531

2020-2022 Restricted Share Plan

3 years

Jan 1, 2020

Jan 1, 2023

Jan 1, 2024

190,973

(82)

(14,205)

NA

176,686

176,686

176,686

2020-2022 Perfor­mance Share Plan

3 years

Jan 1, 2020

Jan 1, 2023

Feb 2025

73,393

(6,676)

(9,979)

1,509

58,247

58,247

58,247

58,247

2020-2022 Restricted Share Plan

3 years

Apr 1, 2020

Apr 1, 2023

NA

6,590

6,590

6,590

Total

 

 

 

 

851,883

281,654

(307,630)

(91,360)

6,431

203,812

740,978

804,720

740,978

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.

TSR (total shareholder return)

Compares the performance of different companies’ stocks and shares over time. Combines share price appreciation and dividends paid to show the total return to shareholders. The relative TSR position reflects the market perception of overall performance relative to a reference group.

ROI (return on investment)

ROI is adjusted operating income of the last 12 months as a percentage of average invested capital. ROI excluding unallocated cost is adjusted operating income of the last 12 months as a percentage of average invested capital for Decorative Paints and Performance Coatings. It excludes unallocated corporate center cost and invested capital.

ROI% excluding unallocated cost

January 2020 - December 2020

 

in €millions

2019

2020

Average invested capital

7,026

6,834

Less: unallocated average invested capital

(595)

(647)

Average invested capital excluding unallocated capital

6,431

6,187

Adjusted operating income excluding unallocated cost

1,106

1,273

Total

17.2

20.6