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Policy

Mandatory

For internal use

November 2011

Nestlé Total Rewards Policy



Policy

Mandatory

For internal use

November 2011

Issuing department

Corporate Compensation and Benefits

Target audience

All employees

Approver

Executive Board Members

Repository

All Nestlé Principles and Policies, Standards and Guidelines

can be found in the Centre online repository at:

http://intranet.nestle.com/nestledocs

Copyright and confidentiality

The content of this document may not be reproduced, distributed

or disclosed to third parties without proper authorization. All rights

belong to Nestec Ltd., Vevey, Switzerland.

© 2011, Nestec Ltd.

DesignNestec Ltd., Corporate Identity & Design,

Vevey, Switzerland

ProductionAltavia Swiss

Paper

This report is printed on BVS, a paper produced

from well-managed forests and other controlled sources

certified by the Forest Stewardship Council (FSC).



1Nestlé Total Rewards Policy

As the leading Nutrition, Health and Wellness

Company, Nestlé’s name is instantly recognisable

throughout the world. But what attracts new

hires and keeps current employees engaged isnot only remuneration and benefits based on

solid performance. It is the hard earned value and

trust that our name brings to those who work

with us; the relationships with our line managers

and fellow workers; recognition and experiences

enjoyed while working for a diverse global

company; possibilities to learn and grow. These

are as a whole, the Total Rewards we receive.

It is important to remember that Total

Rewards need to correspond to what is

valued by employees in each and every Market

in alignment with our Nestlé principles,

culture and the aspirations of our current

and potential new employees.

Total Rewards must be in line with Nestlé’s

corporate governance framework and applied

within the local, legal and socio-economic

environment. There is a certain degree of

discretion in designing programmes to ensure

compliance with prevailing legislation or

comparability with local trends and practices. It

is also important that the “Total Rewards” picture

should be simple to understand and competitive.

It is Nestlé’s expectation that every employee

has a full understanding of the specificcharacteristics of Total Rewards and how they

are established and maintained throughout the

Group. This Nestlé Total Rewards Policy aims

to give this understanding and to explain how

Nestlé is committed to giving each employee

the opportunity to grow, evolve and contribute.

Jean-Marc Duvoisin

Deputy Executive Vice President

Introduction



2 Nestlé Total Rewards Policy

Nestlé, however, is aware that in some

countries legal minimum wage levels are not

always adequate to fulfill the basic needs

of a worker. Nestlé, therefore, is committed

to periodically verifying that the lowest level

of salaries and benefits are not just complying

with local law, but are competitive in allowing

employees to cover their needs according to

local standards of living, further clarified in the

Nestlé Employee Relations and Conditions of

Work and Employment policies.

Nestlé places strong emphasis on the

simplicity and flexibility of its Total Rewards

programmes. Programmes may vary within

Markets depending on the external environment,

government-mandated policies, and the

prevailing tax regime.

The specific elements valued by employees within

each Market, allowing us to attract, retain and

engage our employees, will include:

• Fixed pay

• Variable pay

• Benefits

• Personal Growth and Development

• Work-Life Environment

Reward principles are influenced by individual

performance as well as various factors such as

competitive market practices, cost considerations

and business results achieved both locally and

globally. A Total Rewards programme should

encourage the same coherent approach within

the organisation, both at the Group and local

level. Human Resources, Pensions and Finance

should be involved to balance all considerations.

Nestlé has a long-term vision of being

competitive in the market place. In this context,

the total “employee package” needs to be

taken into consideration. This means that allthe components of Total Rewards have to be

established in harmony with each other.

2. Nestlé Total Rewards

Nestlé in the Market (NiM) principles,

managed by the NiM Compensation and Benefits

Centre of Expertise in the Market, need to be

a prime governance consideration in order toensure consistency in the application of rewards

across all Businesses in the Market.

In line with Nestlé’s Employee Relations

Policy, the Nestlé Total Rewards programmes

must be established within the social and

legal framework of each Market, be fair and

constructive and based on the principle of good

faith. In this respect, Nestlé continues to maintain

its commitment to follow all Collective Bargaining

Agreements (CBAs) agreed to in each Market.

If any interpretation of this document is in

conflict with a CBA, the CBA prevails.

The purpose of the Nestlé Total Rewards Policy

is to provide a reference for all employees to

understand the framework on which our Total

Rewards are structured and the principles onwhich they are based.

The Nestlé Total Rewards Policy is aligned with

our Nestlé Corporate Business Principles and all

other relevant Policies, Guidelines and initiatives.

Corporate and Local Market Context

The principles outlined in this global policy

provide the framework within which individual

markets can create local programmes that

meet their business requirements: Focusing

on attracting and retaining the right talented

employees, building a high-performance culture

and ensuring a highly-engaged workforce

that achieves sustainable optimum business

performance and results.

Rules regarding eligibility and service

requirements will be established in that context.

Performance requirements, determining the

level of rewards, may also apply.

1. Purpose & Scope




Salary Review & Salary Decision Factors

Base salaries should be reviewed periodically,

normally once per year. However, under

extraordinary circumstances, an additional reviewcould be considered. The annual salary review

date is 1 April. Salary reviews should be guided

by individual performance as well as internal

equity and external competitiveness. In addition,

the overall situation of the employee such as

potential, future development plans, the pace

of previous increases and recent salary

adjustments should also be kept in mind when

deciding on a salary increase.

Across-the-board increases should remain

an exception, but may be granted when stipulated

in a CBA or under extraordinary situations such

as high inflation or mandatory general increases,

with the appropriate approval.

The evolution of salaries is fundamentally

dependent upon the performance of the

Market and business results within the socio-

economic context.

3.2. Cash Allowances

Cash allowances form part of the employees’

fixed remuneration, as may be required within

the local competitive and/or legal context.

3.1. Base Salary

The Base Salary is the foundation of total

remuneration. In most cases, the other elements

of remuneration are built on or linked to it.

Competitive Positioning

Regular surveys are used as a benchmark to

determine our competitive positioning in the

marketplace. Nestlé is committed to a pay

for performance culture which endeavours

to differentiate pay levels on an individual

performance basis. Base salaries and wages

are determined locally within the corresponding

salary structure, which should be set at a

level reflecting local market practices, slightly

above the median. Actual base salaries and

wages, however, can be set between the market

median and the third quartile of comparative

competitor levels obtained through appropriate

and reliable survey providers. The exact salary

positioning depends on the salary decision

factors developed below.

The local competitive market is defined as a

group of companies made up of Nestlé’s prime

competitors. These are multinational companies

in the Fast Moving Consumer Goods sector, as

well as any other relevant competitors in the

local employment market.

Salary Structure

Nestlé strives for simple wage and salary

structures that avoid unnecessary complexity.

They must offer flexibility to adjust to specific

requirements and circumstances.

The Markets are responsible for establishing

local salary structures that are consistent with

prevailing market practices and corporate

guidance. Business strategy and objectives

should also be taken into consideration.

Nestlé in the Market (NiM) principles, aligning

compensation and benefits practices between

Globally Managed Businesses and other

operating companies in the Market, must

always apply.

3. Fixed Pay




of a minimum bonus. The responsibility for the

design of STB plans lies with the Market within

the framework approved at corporate level.

4.1.2. Sales Incentives

Sales Incentive Schemes are designed for

sales staff or individuals who influence sales

operations in rewarding the achievement against

sales targets. The core objective is to motivate

sales staff to outperform both qualitative and

quantitative sales targets.

Design and structure of Sales Incentives

Schemes remain the responsibility of the local

Markets/Businesses, and employees who

participate in a Sales Incentive Scheme do not

participate in the STB plan.

4.1.3. Other Variable Remuneration Plans

Other variable remuneration plans for a defined

group of employees, based on predetermined

measures, are also possible. Emphasis should

be placed on both quantitative and qualitative

objectives, but in some circumstances qualitative

objectives can be a primary consideration.

4.1.4. Special Payments

It is also possible to pay out non-recurring,

one time spot-bonuses or awards to individuals

in situations of extraordinary achievements,e.g. successful completion of a critical project.

This should remain an exception and be

approved by appropriate Business and HR

Management levels.

4.2. Long-Term Incentives (LTI)

Nestlé puts strong emphasis on sustainable

growth and performance, and the creation of

value for our Company. By linking rewards to

the success of Nestlé, the company not only

strengthens long-term performance, but also

allows the attracting and retaining of the best

talents. This strategy is the underlying principle

for the design of Long-Term Incentive Plans (LTI).

LTI Plans are designed and driven by Corporate

HR and remain a key retention tool for senior

management. Equity or cash-based programmes

provide incentives to selected employees for

reaching longer-term value objectives of the

Group or business unit.

The purpose of variable remuneration schemes is

to stimulate the entrepreneurship of participating

employees and to ensure that they are motivated

to perform even beyond expectations. Theobjective is also to support employees’

participation in the successes of the Company.

The individual’s eligibility for a variable pay

scheme depends on the framework defined

at Group level and local Market conditions.

As a guiding principle, employees should

be part of only one single variable pay scheme,

either Short-Term Bonus, sales incentive or

other variable remuneration plans.

4.1.1. Short-Term Bonus (STB)

The Short-Term Bonus (STB) provides an

opportunity for recognising employees who

deliver tangible results for the business,

against agreed targets. STB target levels are

expressed as a percentage of Annual Base

Salary in line with the corresponding framework

determined at Group level and prevailing local

Market practices.

Objective Setting and Alignment

Alignment of objectives and Short-Term bonus

payout is based on achievements against

expected Collective and/or Individual factors

defined at the beginning of the performanceperiod, typically a calendar year. In general,

a balanced combination of Collective and

Individual objectives is recommended.

To successfully deliver our business strategy

and support our Performance Culture, the

objectives must be based on the Business

Unit’s strategy, which is aligned with the Nestlé

Strategic Performance Framework.

Collective objectives are based on business

targets shared with others, cascaded from

a higher level which implies an indirect and

collective responsibility. In addition, the

STB should include individual business or

functional objectives with direct and individual

responsibility, e.g. quantitative or qualitative

business or individual performance objectives,

quality standards, or sustainable improvements to

methods and processes as outlined under Result

Focus in the Nestlé Leadership Framework.

Objectives are defined by the manager in

agreement with the employee, in a Specific,

Measurable, Achievable, Realistic, and Timely

(SMART) way.

Short-Term Bonus pay-outShort-Term Bonuses are delivered as a cash

payout based on achievement of targets against

objectives. There is no guarantee for the payout

4. Variable Pay




Disability and Life Benefits

Short and/or long-term disability benefits as well

as survivor and/or life benefits are provided

in the form of income and/or lump sum paymentto support employees through difficult times.

5.3. Other Benefits

Vacation

Markets may offer vacation time in excess

of legal requirements, providing employees with

additional leisure time to use at their discretion.

Employees are encouraged to take their annual

vacation entitlement, which is provided according

to Market policy.

Perquisites

Perquisites or fringe benefits, such as company

car, car allowances or company transportation are

provided in line with local competitive practices.

As an Employer of Choice, Nestlé wishes

to provide comprehensive and competitive

Employee Benefits as part of the Total

Rewards package:• Benefit programmes represent a substantial

financial commitment on the part of the

Company and often also of the employees.

To leverage the value of the benefits offered

to our employees, and whenever appropriate

and in line with local competitive practice,

employees can be given, the flexibility to

choose the level and/or type of benefits

best suited to their individual needs,

circumstances, family situation and/or

life cycle stage.

• Benefit programmes have to be affordable and

sustainable. Their design and delivery must

be in line with Company guidelines as well as

with local conditions and practices in each

country, and at all times compliant with local

mandatory and social security requirements.

Depending on the specificity of each Market,

the benefit programmes offered may include

some or all of the following benefits:

5.1. Pension and Retirement Schemes

Such benefits aim to support employees in

ensuring an adequate standard of living after

retirement, according to local standards and inaddition to State/social security benefits, personal

savings and/or other individual retirement

financial arrangements.

5.2. Insurance Benefits

Insurance benefits aim to provide protection

against risks such as illness, accident, death,

and disability with the accompanying financial

consequences. Depending on market practice

and requirements, these programmes are usually

provided to the employees on a contributory

basis, in addition to the occupational and/or

mandatory/social security workers’ compensation

benefits in case of work-related disability,

accident or sickness.

Medical Benefits

Medical benefit programmes aim to provide

access to quality healthcare and/or health

insurance benefits in case of illness and/or

accident. Nestlé also encourages all employees

to participate in the employee wellness, health

promotion and prevention initiatives as well as

other programmes offered in the Markets

(see also Work-Life Environment section).

5. Employee Benefits




6.3 Training and Learning

To achieve competitive superiority through

our people, Nestlé is committed to lifelong

learning, which is a three-way partnership: Theindividual who is responsible for his/her own

development; the Manager who encourages,

coaches and mentors that development and

the Training and Learning team who completes

the triad by offering learning consulting,

products and services to assist leaders,

employees and the business in their quest for

continuous improvement.

Performance and development discussions

act as the critical link to help determine and

recommend the types of training, resources, and

tools made available to each employee.

6.4 Recognition

Nestlé encourages the recognition of

special efforts for achievements, as well as

the loyalty and long-term commitment

of its employees, contributing to the overall

success of the Company. Formal or informal

recognition programmes aim to reward,

on the spot, individual and teams’ contribution,

usually without predetermined goals or

performance levels.

Awards can be cash (please see Special

Payment, 4.1.4) or non-cash (e.g. non-financial),and in the form of verbal recognition, trophies,

certificates, plaques, dinners, tickets, gift

vouchers etc. They can be delivered and

communicated one-to-one or through more

formal, company-wide recognition programmes.

Nestlé endeavours to foster a culture where

career and development opportunities are a

significant component of its Total Rewards

and where growth and career advancementopportunities are linked to performance, potential

and the appropriate differentiation of rewards.

Managers and supervisors have a key role to

play in inspiring, motivating and engaging their

employees, providing guidance and day-to-day

coaching to support them in their performance

and development goals.

6.1 Performance Evaluation

Our ability to measure the growth potential of

each employee is realised in part through their

ability to achieve objectives, cascaded down

from the Nestlé Roadmap and Zone, Business or

Market Blueprints. These align all performance

objectives in a clear, concise and strategic

manner.

Performance evaluation measures and

recognises individual performance in a fair and

transparent manner. Through performance

evaluation, employees know what to focus on in a

given performance year. Whilst WHAT is achieved

in terms of objectives is important, Nestlé puts

an equal emphasis on HOW these objectives are

delivered, by focusing on some key behaviours

that are in line with Nestlé values and principles.Through performance evaluation, employees

should also receive honest and regular feedback

in order that they may continually improve.

Performance evaluation is a core pillar

which can enable a clear direct link between

performance and rewards.

6.2 Development and Career

Employees have regular discussions with their

managers about their long-term aspirations,

ambitions, career opportunities and development

needs. Employee action plans are implemented

to engage employees to perform better, fulfill

their potential and to reach their long-term

aspirations, taking advantage of the learning

opportunities available.

In line with Nestlé’s multicultural and

international essence, international careers may

be made available to appropriately qualified

employees, and create further opportunities for

advancement in an employee’s career.

6. Personal Growth and Development




individual circumstances such as life stages/

cycles are taken into account. The “Flexible

Work Environment at Nestlé” guidelines

provide directions for each Market toimplement in line with their local business and

cultural context.

• Lifestyle and Wellness programmes,

whereby, and wherever feasible, the Company

endeavours to provide access to various

forms of employee assistance programmes

including dependent care, counselling,

fitness centre affiliations, smoking

cessation programmes, stress management

programmes, health screenings and other

workplace convenience services.

• A safe and caring environment where safety

and health is a fundamental value.

An inspiring Nestlé Work Environment is a

requirement in attracting, retaining and

engaging our high performing Nestlé talents.

This depends on the level of trust eachemployee has in Nestlé and our ability to truly

live our values and principles.

Nestlé, within the cultural-social context

of each Market, aims to promote a healthy and

positive lifestyle at work and outside of work,

and is thereby committed to providing:

• A positive and inspiring work-life environment

which supports a good balance between work

and personal life.

• Opportunities to participate and contribute in

volunteer programmes, where appropriate,

that leverage the Creating Shared Value (CSV)

principles that are important to us.

• Work-life flexibility whenever possible in order

to provide a framework in which specific

7. Work-Life Environment

It is the responsibility of each manager to propose

within the framework of the Company policy,

the remuneration of their employees. They will

also communicate the salary policy, decisions

and the individual remuneration to each staff

member, taking into account their performance

and specific responsibilities.

The necessary time should be spent with

each employee to explain his or her specific

situation in terms of remuneration and benefits,

if needed with the support of HR management,

in order to communicate properly, clearly and

with sufficient transparency.

Corporate Compensation & Benefits (C&B)

will provide the necessary support and guidance

so that the NiM C&B are able to ensure all pay

and benefit programmes are implemented and

communicated coherently and consistently

across the Market and Businesses. As a result,

all employees will have a clear understanding of

the programmes in which they participate.

8. Employee Communication




The way in which a remuneration policy is set

up reflects a company’s corporate governance,

i.e. how the company is run, how it ensures

Compliance and how it assumes its responsibilityby Creating Shared Value for employees

and society.

In addition, all the pay and benefit programmes

which are part of this policy must be in full

compliance with applicable local, national and/

or international laws and regulations, as well as

Nestlé’s internal regulations.

Remuneration levels should properly reflect

the skills and the efforts of an employee. Nestlé

gives equal consideration to all employees,

regardless of the level of their remuneration and

without any discrimination with respect to, but

not limited to, origin, nationality, religion, race,

gender, age or sexual orientation, as stated in the

Nestlé Corporate Business Principles.

Nestlé understands the importance of

transparency towards its shareholders and

the public. Such transparency goes along

with the disclosure of pertinent information.

Due consideration must also be given to the

protection of the employees’ privacy.

Corporate Human Resources is available

for advice and active support in connection

with the design, review and implementation

of all elements of this policy.

9. Corporate Governance, Complianceand Creating Shared Value

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