Core employment regulations

Work regulations of Bank Polska Kasa Opieki Spółka Akcyjna (hereinafter referred to as: “Work Regulations”) set out the organization and structure of work at Bank Pekao as well as rights and obligations of the Bank and its employees. The Work Regulations apply to all employees of the Bank, regardless of the nature of their work, position or basis of employment relationship.

The Bank informs employees of the amount of annual leave to which they are entitled in their employment contracts and, with regard to parental leave, this information is provided to employees on an ongoing basis in accordance with current common law.

In accordance with the amended provisions of the Labor Code, on March 30, 2023, the Bank entered into an “Agreement on the Principles of Remote Work” with the Trade Unions operating at the Bank, defining the organization and order of the remote work process and the related rights and obligations of the Bank and employees.

The Bank applies notice periods arising from the Labor Code or employment contracts, provided that they are not less favorable than those arising from Labor law. Consultation concerning the termination of employment contracts are conducted at the Bank in accordance with Polish legal regulations. In 2023, the Bank mostly used one- or three-month notice periods.

In line with applicable regulations, the Pekao Group and the Bank must prevent discrimination in the process of entering into and terminating employment contracts, terms of employment, promotion and access to training to improve professional qualifications, including in particular discrimination against gender, age, disability, race, religion, nationality, political opinions, membership to trade unions, ethnic origin, faith, sexual orientation and employment for an unlimited, or limited time or full-time or part-time employment.

The CLA currently in force was concluded on December 15, 2005 between Bank Polska Kasa Opieki S.A. and company trade unions operating at the Bank. Amendments to the CLA in the form of an Additional Protocol were concluded successively in 2007, 2022 and 2023. The amendment to the CLA in 2022 and 2023 concerned the agreement of new bonus rules for sales network employees in the Retail Banking Division. The 2023 Additional Protocol was registered by the State Labor Inspectorate on December 21, 2023. Thus, the said bonus rules became an integral part of the CLA.

The Bank does not use any additional pension schemes, apart from the universal ones. As an employer, the Bank fulfils all its obligations arising in relation to the universal pension scheme and is not in arrears with any contributions payable from employees’ remuneration and the employer’s contributions. The Bank makes additional pension and retirement severance payments for employees entitled to such benefits under the universal pension and retirement insurance scheme.

The Bank, in the event of a decision to conduct collective layoffs, acts in accordance with the applicable provisions of generally applicable law and the CLA. The Bank’s decision is communicated to all employees, as well as to trade union organizations. In accordance with the law, the Bank consults its intention to carry out group layoffs with trade unions in accordance with the Act of March 13, 2003 on special rules for termination of employment relations with employees for reasons not related to employees. The Bank seeks to ensure that consultations of its intention to carry out group layoffs with the trade unions are concluded with the conclusion of a group layoff agreement.

Pursuant to the CA, in the event of termination of employment contracts for reasons not related to employees, employees are entitled to cash severance payments of three times the amount to which they are entitled under generally applicable laws. The amount of severance pay may not exceed 36 times the minimum salary in effect on the date of termination of employment.

In addition, the Bank seeks to conclude an agreement with the Labor Office on labor activation of laid-off employees in each case.

The Bank’s social activities are organized in accordance with generally applicable laws and ensure the social security of its employees. The Regulations of the Company Social Benefits Fund set out the rules and conditions for the use of services and benefits financed from the Fund, as well as the rules for the allocation of the Fund’s resources for various purposes and types of social activities.

According to Polish legislation, the amount of the basic allowance per employee is 37.5% of the average monthly salary in the national economy in the previous year or in the second half of the previous year, if the average salary of that period was a higher amount. The Bank’s Company Social Benefits Fund is created from an annual basic allowance, in accordance with the provisions of the Collective Labor Agreement – per employee the allowance is 50% of the average monthly salary in the national economy in the previous year or in the second half of the previous year, if the average salary of that period was a higher amount. The Bank does not charge the deduction for pensioners or retirees, however, it does take care of them.

The remuneration strategy developed in accordance with operating standards and values constituting the basis of the Bank’s mission is reflected in internal regulations and makes it possible to develop and protect the Bank’s reputation and create permanent values for all stakeholders. The Remuneration Policy of Bank Polska Kasa Opieki Spółka Akcyjna is a key regulation in this area.

In the remuneration structure, remuneration is directly connected with performance, which guarantees financial stability and variable remuneration adjusted to the Bank’s financial capacity. The policy also provides for incentive systems including the minimum performance of the Bank below which a bonus is not paid. Variable remuneration includes all remuneration components which are dependent on performance and the payment of such remuneration is directly dependent on individual achievements and the Bank’s results adjusted by risk.

Sustainable results contributing to long-term value creation for stakeholders refer to the actual results achieved and the way in which they are achieved, with a view to measuring results consistent with shareholders’ interests and profitability principles based on a safe level of risk, sustainable risk management practices and multidimensional analysis of results and quality of activity.

Base salary is a fixed element of remuneration paid for the position, duties and responsibilities covered, which reflects the level of experience, skills and competencies required for the position, as well as the overall quality of commitment to the Bank’s performance. The fixed remuneration component makes up such a large enough part of total remuneration that flexible remuneration policies are possible.

To ensure that the remuneration structures are competitive and transparent and the remuneration system is effective and fair, the Bank monitors market trends in relation to remuneration forms and levels. Decisions concerning the remuneration system at the Bank are made taking into account the data on market trends in the area of fixed remuneration, as well as incentive systems. Such data are obtained from consultancy firms offering analyses of the financial sector. In 2023, the analysis of consistency in salaries between men and women in identical positions continued, in order to make efforts to equalize the pay gap that exists in the Bank.

The Bank also has a Remuneration Policy for Members of the Bank’s Supervisory Board and the Management Board of Bank Polska Kasa Opieki Spółka Akcyjna, which sets forth framework principles and rules for establishing, monitoring and controlling the Bank’s remuneration principles and practices for members of its Supervisory Board and Management Board.

The Remuneration Policy for Members of the Supervisory Board and the Management Board of Bank Polska Kasa Opieki Spółka Akcyjna supports proper and effective risk management and does not encourage excessive risk taking beyond the acceptable overall risk level approved by the Bank’s Supervisory Board; implementation of the Bank management strategy and risk management strategy; mechanisms for managing and mitigating conflicts of interest in the Bank’s activities; ensuring that remuneration and any associated terms and conditions of employment that affect remuneration, including conditions for awarding and paying remuneration, are gender-neutral, i.e. not differentiated in terms of gender.

Solutions adopted in this Policy contribute to the implementation of the business strategy, long-term interests and stability of the Bank as well as aim to support the sustainable growth of the Bank, including to ensure that the Policy is consistent with the strategy for the introduction of risks to sustainable growth in the investment decision-making process into the Bank’s operations.

Due to the special function and generally applicable regulations governing relations between members of corporate bodies and the company, the Bank does not conclude employment contracts with Members of the Supervisory Board of the Bank and Members of the Management Board of the Bank, whereas it concludes Contracts for management services with Members of its Management.

Members of the Supervisory Board are entitled to remuneration in a fixed monthly amount and are not entitled to any variable remuneration.

The total remuneration of a Member of the Management Board consists of a fixed part constituting the basic monthly remuneration and a variable part, representing supplementary remuneration for the Bank’s fiscal year. The variable remuneration of a Member of the Bank’s Management Board depends on the level of achievement of the established management objectives (among other things, growth in the Bank’s value and improvement of economic and financial indicators) and may not exceed 100% of the fixed remuneration of that Member of the Bank’s Management Board in the previous fiscal year for which the calculation of the amount of the variable remuneration to be paid is made. Should the contract be dissolved or terminated by the Bank for reasons other than a breach of basic obligations, a Member of the Management Board may be awarded a severance pay in the amount not higher than three times the fixed remuneration, provided that they have discharged the office for at least twelve months prior to the termination of the contract. It is also possible to conclude a non-compete agreement with a member of the Bank’s Management Board that is effective after the termination of his or her position.

Members of the Supervisory Board and members of the Bank’s Management Board have the right to join Employee Capital Plans (ECPs) on the terms and conditions in force at the Bank.

Based on the remuneration system, employees are offered non-financial benefits that ensure just treatment and consistency of the remuneration system.

Every year, a report on the functioning of the remuneration policy of the Bank is prepared, while the Bank’s Supervisory Board, taking into account the opinion of the Nomination and Remuneration Committee of the Bank’s Supervisory Board, provides an assessment of the functioning of the Remuneration Policy at the General Meeting of Shareholders to assess whether the remuneration policy favors the development and safety of the Bank’s operations.

Companies of the Pekao Group have remuneration policies adapted to the size and nature of their activities and remuneration principles.

The Bank has three main incentive systems in place: A Variable Remuneration System for Management Staff, Management by Objective (MBO) System, and a system based on the Collective Agreement providing, in particular, for a quarterly bonus, bonus for retail sales force and an incentive award.

Top management is subject to the variable remuneration system dedicated to persons having a significant impact on the Bank’s risk profile. The aim of the system is to support the implementation of the Bank’s strategy and to reduce excessive risk and conflicts of interest. In this system, a participant may obtain variable remuneration based on the bonus pool concept. The system provides for a comprehensive measurement of performance by individuals, business units and the whole Bank, including the evaluation of the participant’s compliance with law and the Bank’s standards and risk assessment. In order to strengthen care for the construction of a durable value of the Bank in the long term under the system, at least 50% of the bonus is implemented in phantom shares based on the value of the Bank’s shares and at least 40% of the bonus is deferred and paid after the end of the assessment period for which it is entitled.

The variable remuneration system is prepared by the HR Division with involvement and participation of other organizational units of the Bank. This is to ensure that the system complies with the Bank’s regulations, articles of association, and ethical standards or other standards of conduct that apply to the Bank in a way that legal, compliance and reputation risks that are mostly connected with customer relationships are duly monitored and managed.

Variable remuneration systems implemented in the Bank’s subsidiaries have similar schemes for the division of remuneration into cash and financial instruments, taking into account general provisions and guidelines of market regulators concerning sectors in which companies operate.

The MBO system is addressed to employees hired on the basis of a management contract, including in particular sales functions and management functions having a significant impact on the achievement of the Bank’s planned commercial objectives. As part of the MBO system, employees receive individual objectives that result from the Bank’s financial plan and key objectives adopted for a given year. The amount of the annual bonus is determined by the level of performance of these tasks, as well as the result achieved by the Bank. Sales employees periodically, each quarter, can receive an advance on their annual bonus when they meet targets.

The system based on the Collective Labor Agreement applies to all employees subject to the Agreement. Pursuant to the Collective Labor Agreement, the system is based on a quarterly discretionary bonus the amount of which is conditioned on the evaluation of an employee’s performance and commitment and the Bank’s results in a given year. It also provides for an incentive award which is granted for special professional achievements. In 2023, there were guidelines for variable remuneration, i.e., quarterly bonuses for sales network employees covered by the CLA. According to the Guidelines, employees’ bonuses were awarded based on the employee’s individual sales performance with a quality component. Determination of the final amount of variable remuneration for employees covered by the Guidelines depended on the results of the evaluation of the employee’s compliance with the goals or objectives.