Performance and Participation
Fair pay and a share in the Company’s success underpin the motivation and performance of our employees but also help to protect jobs and keep us competitive. Employee participation and codetermination rights for employee representatives are key factors in the Volkswagen Group’s success, so we engage in dialogue with our employees to set standards for good work.
Promoting Performance and Sharing Profits
The systematic fostering and recognition of good performance is another vital element in our PM strategy, along with redesigning our pay system to ensure that employees have a sustainable share in the success and profits of the Company.
Since 2010, Volkswagen AG has had detailed standard criteria for skills development and performance assessment. These criteria cover the entire workforce, from apprentices to top managers, and are underpinned by concrete incentive systems within the pay structure.
The pay system for Volkswagen AG employees covered by collective agreement comprises three main components:
- basic pay in the form of a competitive monthly salary
- a performancerelated component, which rewards individual performance
- an entitlement to profit-sharing, which is laid down by collective agreement.
This three-tier remuneration system has proven its worth within Volkswagen AG as a tool enabling the workforce to participate in the Company’s success. At the same time, it helps recognize individual achievements while maintaining competitiveness.
The system is, therefore, increasingly being implemented as standard throughout the Group, including at Audi, ŠKODA and Volkswagen Slovakia. In 2013, employees at more than 30 Group sites benefited from profit-sharing.
Sustainable pay components for members of the Board of Management and management.
As part of the introduction of a performance-related pay component, it was agreed that each employee should have an annual appraisal with his or her line manager.
Collective Agreements in 2013
In 2013, the Volkswagen Group conducted more than 20 rounds of collective bargaining in Germany and at sites around the world. There was a strike at one Group site that was, however, part of a sector-wide dispute between the relevant employers’ umbrella organization and the trade union and was resolved at that level. To preserve competitiveness and protect employment, a number of sites concluded collective agreements running for periods of more than one year. Volkswagen AG’s 2013 settlement runs for 20 months and provides for basic pay to rise by 3.4% from September 1, 2013 and again, by 2.2%, from July 1, 2014. Volkswagen AG also boosted pension provision for its employees by making a one-off employer contribution of €300 per employee to the Company pension plan. At Volkswagen do Brasil plants, management and unions concluded local agreements in 2012 and 2013 that run for up to five years. Volkswagen of South Africa (Pty.) Ltd. concluded a three-year collective agreement in July 2013, while ŠKODA Auto a. s. concluded a five-year agreement for permanent employees at its three locations in the Czech Republic, including a job security guarantee that is to date unique in the country.
Long Term Incentive (LTI) for Long-Term Success
The pay for management employees across the Group includes three variable components: the personal performance bonus; the Company bonus; and the Long Term Incentive (LTI), introduced in 2010. The LTI is calculated over a four-year period, making it the component that reflects sustainable development by the Company. Components of this kind were required by the 2009 legislation on remuneration of Board of Management members, but the LTI is applied more widely at the Volkswagen Group to the whole of its management. The Long Term Incentive is linked directly to the goals set out in the Group’s Strategy 2018: top employer status and top ratings for customer satisfaction, sales and profitability.
As part of the introduction of a performance-related pay component, it was agreed that each employee should have an annual appraisal with his or her line manager. This appraisal has two components, performance assessment and development planning. Each employee is given specific feedback on his or her performance and clear guidance on career prospects. Recognizing and valuing good performance is just as important in this context as identifying individual potential or specific further training needs. Appraisals using the same criteria were also carried out within Volkswagen Financial Services AG and Volkswagen Immobilien Service GmbH.
The system of appraisals linked in part to a performance-related pay component is being rolled out across Group brands and companies. Over the reporting year, for example, appraisals in line with Group standards were introduced for all employees covered by collective bargaining at VW Group Rus in Kaluga (Russia). Individual appraisal was also introduced for all management staff in 2010. As well as performance assessment and development planning, these appraisals include target-setting and assessment of target achievement.
Since 2013, all temporary external personnel employed at Volkswagen AG also benefit from a performance-related pay component from their second year with Volkswagen. The process by which this component is determined is similar to the individual annual appraisal process at Volkswagen AG.
We use a wide range of flexibility tools to help maintain competitiveness and protect jobs. In 2013, we again responded flexibly to changes in the business environment. For example, we were able to protect jobs at Volkswagen Autoeuropa by relocating around 200 Portuguese production staff to Volkswagen AG in Wolfsburg for several months, enhancing value at the German plant.
Under the collective agreement on sustainable site retention and employment protection, all Volkswagen AG employees enjoy employment security until at least the end of 2014. The Innovation Funds set up at the initiative of the General Works Council and governed by the same collective agreement represent a major contribution to safeguarding employment. There are two Funds:
- Innovation Fund I, set up in 2007, helps to further develop existing skills areas at the various Volkswagen sites.
- Innovation Fund II, set up in 2011, develops new areas of business closely related to the automotive value production chain.
Until at least the end of 2014, Volkswagen AG is committed to recruiting apprentices and, subject to specific performance criteria, giving them permanent employment on completion of their training. Former apprentices who do not meet these criteria are initially offered a two-year fixed-term contract. After two years, the performance assessment that forms part of their individual annual appraisal constitutes the basis for the decision as to whether to take them on permanently.
Recruiting Local Personnel
We support the recruitment and qualification of local personnel as a way of developing the local communities and regions in which the Volkswagen Group operates. And when we open a new site, we always seek to recruit local personnel. For example, when we opened the plant in Chattanooga (USA), we agreed to give local people priority in recruitment. The same is true of the new plant in Urumqi (China), where we plan to employ the groups that make up the region’s population on a pro rata basis.
Participation and Co-Determination
The International Charter on Labour Relations first came into force in 2009 and links increased participation rights with shared responsibility. The Charter applies internationally and provides for phased rights to information, consultation and codetermination for employee representatives of the brands, companies and sites represented on the Group Global Works Council. The rights it guarantees employee representatives relate, among other areas, to PM and industrial relations provisions, work organization, remuneration systems, information and communications, initial and in-service training, occupational health and safety, process controlling, and social and environmental sustainability.
Since 2009, management and employee representatives at many sites outside Germany have negotiated declarations of intent and outline implementation arrangements. Further site agreements on local implementation of the Charter were concluded in 2013, including at Porsche Holding Gesellschaft m. b. H. in Salzburg and the Volkswagen Group United Kingdom Ltd. 2013 also saw plant-level co-determination being extended at a number of sites in line with the Charter: the Indian plant at Pune, for example, was one of several to hold inaugural townhall meetings or symposia. At many sites, the work of local employee representatives is now being coordinated or developed within special committees.
Qualification workshops for local implementation of the Charter on Labour Relations.
The Group Global Works Council and Company management regularly monitor implementation of the Charter on Labour Relations in individual Group companies. At meetings of the European Group Works Council and the Group Global Works Council, representatives from the various sites report back on how local bodies and working structures are being set up and developed and how the tools contained in the Charter are being applied, sharing examples of best practice. In 2013, a number of qualification workshops were held to help employee representatives implement the Charter locally: these workshops were held at cross-company level (for the Central and Eastern Europe region) as well as for specific sites, such as Volkswagen in Poznan (Poland), for production companies such as Volkswagen India, and for the sales and financial services sector (Volkswagen Group Sverige).
To improve the situation of workers, working conditions, participation rights and job security in the Group’s Chinese joint ventures, a Liaison and Coordinating Committee was set up back in 2008, bringing together the General Secretary of the Group Global Works Council, the Presidents of the trade unions within the Chinese joint venture companies, and representatives of the Company itself. Chinese joint venture companies that were not previously represented joined the Committee in 2013, most notably the components plants.
In September 2012, the Group Global Works Council set up a Commercial Vehicles Committee, bringing together employee representatives from the Scania, MAN and Volkswagen Commercial Vehicles brands. This Committee supports the integration of commercial vehicle brands in the Volkswagen Group and also has extensive information and co-determination rights.
Since 2008, the Group Global Works Council has also had a Sales and Financial Services Committee. One of the roles of this Committee is to review and develop the co-determination rights of the companies represented on it in line with the International Charter on Labour Relations.
Charter on Temporary Work
The Charter on Temporary Work, signed in November 2012, represents agreement between Group management, the Group European Works Council and the Group Global Works Council on the key principles governing the use of temporary work across the Group. The underlying aim is to ensure that temporary external personnel benefit from appropriate employment and remuneration conditions and that temporary work is managed consistently across the Volkswagen Group. The main provisions of the Charter relate to:
- The reasonable use of temporary work as a key flexibility tool
- Implementation of equal pay: with reference to the standard basic salary
- Implementation of equal treatment: temporary external personnel should enjoy parity of employment conditions and qualification provision with the permanent workforce.
This Charter offers all temporary external personnel the chance to be moved on to a permanent contract provided they have the necessary skills and the Company has a need for those skills. However, temporary work is one way in which Volkswagen can manage fluctuations in the economy or particular projects, such as constructing plants or sections of plants. In such cases, temporary work, along with outside recruitment, may be a sensible PM strategy for supplementing the core workforce.
In 2013, measures were agreed at Volkswagen Group locations to implement the Charter on Temporary Work, with the first packages of measures being put in place. Specific agreements implementing the provisions on equal pay and equal treatment were concluded at SITECH Sitztechnik GmbH and Volkswagen Osnabrück GmbH as well as at Bentley and ŠKODA.
The Employee Opinion Survey – Worldwide
The employee opinion survey, or “Stimmungsbarometer”, is a tool that involves employees actively in what is going on in the Company. This standardized Group-wide survey measures employee satisfaction annually, and once the survey is complete, the findings are jointly discussed by supervisors and employees, a process that highlights problems on the one hand and suggestions for improvements to work processes on the other. Improvements agreed on are then implemented before the following year’s survey.
The employee opinion survey was conducted for the sixth time in 2013, and during the reporting year, a twelfth statement was added to the survey, seeking employees’ views on provision for in-service training. The survey covered 121 corporate sites and companies in 40 countries, and over 400,000 employees took part out of a possible total of around 450,000 – a response rate of 89%. The reporting year saw employees of Porsche, MAN, Volkswagen Group Retail Deutschland GmbH and Volkswagen Group Polska Sp. z. o. o take part for the first time.
Alongside the employee response rate, the key indicator generated by the employee opinion survey is the employee satisfaction index. During the reporting year, the score on this indicator was 79 out of 100. 32
412,795 ideas from employees saved more than €312.5 million.
The employee opinion survey enables employees to take an active part in what is going on in the Company. It measures employee satisfaction annually and, once the survey is complete, the findings are jointly discussed by supervisors and employees.
Continuous Improvement and Ideas Management
Employees use their creativity, knowledge and initiative to take responsibility for process and product improvement under the Ideas Management program. Ideas management is a vital management and motivational tool for line managers across the Company and has been an integral part of Volkswagen’s culture of improvement for many years. The ideas management process also helps to make working at Volkswagen both safer and healthier. The challenges of demographic change are given a high priority, with special consideration given to suggestions for ergonomic improvements.
The “Volkswagen Way”
The “Volkswagen Way” is a key tool for securing continuous improvement. It has been an integral part of the way Volkswagen operates for six years. The core of the “Volkswagen Way” is a process of continuous improvement which aims permanently to develop productivity and quality as well as ergonomics, leadership and teamwork. In the “Volkswagen Way”, the Company has established a tool that consistently applies high standards to driving improvement and solving problems systematically and sustainably across all areas. The commitment and involvement of every employee is essential to the success of this tool. In 2013, the focus was on optimizing overarching workflows and improving teamwork.
The Volkswagen Group offers all its employees the opportunity to acquire a vehicle from at least one Group brand on favorable terms. The terms of this benefit must be affordable for the employee and commercially viable for the Company. Apprentices at Volkswagen AG, for example, enjoy special concessions on the purchase or leasing of a vehicle.
Volkswagen AG contributes to the benefits provided by social insurance schemes, such as sick pay, and supports dependents when an employee dies. The Company also has a collective accident insurance policy that covers all employees against accidents resulting in death or invalidity. In exceptional cases of economic hardship, the Company grants employees a short-term loan. Employees of Group companies around the world also enjoy further company benefits. These may include:
- subsidized transport and meals
- low-cost accommodation
- monthly childcare allowances
- discounts on selected leisure activities.
Health care benefits or additional pension insurance round off the range of company benefits.
The Company Pension Plan
Volkswagen AG, all its brands and all its subsidiaries in Germany run company pension plans to ensure that former employees have
a source of income in retirement. At Volkswagen AG, the arrangements comprise a basic pension and contributory pensions I and II. The basic pension and contributory pension I are employer-funded, while contributory pension II offers employees an opportunity to convert part of their pretax salary into pension contributions. Since 2001, payments to Volkswagen AG’s Company pension plan have been invested in the capital markets by the scheme, which is administered in trust by the Volkswagen Pension Trust e. V. By the end of 2013, 22 other Group companies in Germany were also using these arrangements.
At year-end 2013, the Company’s pension fund had total assets of €3,508 million for employees’ retirement and disability pensions and lifelong annuity benefits for surviving dependents in the event of death. Employees can also make direct contributions to their own pension provision by converting a proportion of their salary into pension contributions.
Volkswagen AG’s Time Asset Bond is a scheme to reduce the length of an employee’s working life. Since 1998, the Bond has offered employees the chance to bring forward their retirement age by making contributions from their gross salary or their working time credits. Their contributions are invested in the capital markets by the Time Asset Fund, which is administered in trust by the Volkswagen Pension Trust e. V. The Time Assets accumulated can then be used to enable employees to take paid time off in the run-up to retirement. At the end of the reporting year, the Time Asset Fund had assets of €1,519 million.
The assets of the Volkswagen Pension Trust are invested in special funds that comply with the provisions of Germany’s investment legislation. The two funds – one for the Company pension plan and the other for the Time Asset Bond – comprise individual segment funds for different investment classes. These segment funds are administered by independent professional special fund managers. The Volkswagen Pension Trust lays down investment guidelines
for the special fund managers. These guidelines form part of the contract governing all special fund managers and specifically exclude any investment in companies manufacturing cluster munitions. This exclusion applies to all individual funds within
the overall portfolio of around €5 billion. Within this portfolio, we have also set up two special sustainable investment funds, which apply sustainability criteria to investments in Europe and around the world.