24 | share-based remunerations

Wages and salaries includes an amount of € 4,880 (2014: € 404) relating to share-based remuneration for key management and other employees. An amount of € 145 (2014: € 89) in costs relating to share-settled remuneration was directly recognised in equity. The costs of cash-settled remuneration were € 4,735 (2014: € 315). The costs are largely influenced by the intended public offer announced by Recruit Holdings Co., Ltd. The provisions include an amount of € 3,991 (2014: € 1,363) for share-based payments settled in cash.

Unique Share Plan 2011 - 2014
The Unique Share Plan 2011-2014 covered the period from 1 January 2011 to 1 January 2015. The unconditional granting of shares took place in May 2015, after which a holding period of one year came into effect. The intrinsic value at the date the shares were unconditionally granted was € 12.26. In addition to the participant still being in the employment of the group at the time of unconditional granting, the performance criteria were based on the extent to which targets relating to financial results were met. Based on the financial results realised a matrix applied to each performance year that could result in a maximum of 140% times and a minimum of zero times the norm number of shares being granted conditionally. Additional non-financial performance targets were agreed for key management which could result in a maximum of 30.0% of the norm number of shares being granted conditionally in each performance year. As a result the maximum factor applicable to key management was 170.0% of the norm number of shares.
The wage tax of key management is payable by the group, which is recognised as a transaction settled in cash. The gross value of the shares conditionally granted each year is set at a maximum of the fixed annual remuneration for both key management and other senior management. The fair value was determined based on a Monte Carlo model to express the valuation of the maximum amount conditionally granted.

The movement was as follows:

2015

KEY-MANAGEMENT

OTHER

SETTLED IN SHARES

SETTLED IN
CASH

SETTLED IN SHARES

Number of participants

2

53

Balance as at 1 January

94,496

68,594

Withdrawn

-

-1,689

Unconditionally granted

-94,496

-66,905

Balance as at 31 December

-

-

In 2014 the movement and parameters were as disclosed below:

2014

KEY-MANAGEMENT

OTHER

SETTLED IN SHARES

SETTLED IN
CASH

SETTLED IN SHARES

Number of participants

2

56

Balance as at 1 January

126,278

139,207

Conditionally granted

-

9,143

Withdrawn

-31,782

-79,756

Balance as at 31 December

94,496

68,594

Fair value

€ 6.24 - € 8.93

€ 9.33

€ 4.37 - € 11.99

Average share price for the determination of fair value

€ 7.70 - € 12.47

€ 9.33

€ 5.00 - € 12.09

Dividend yield

3% - 5%

0%

0% - 6%

Volatility

47% - 49%

42%

36% - 49%

Risk-free interest rate

0.8% - 2.3%

0.0%

0.0% - 2.2%

The number of shares stated in the table is based on performance factors achieved.

Variable long-term remuneration 2015-2018

The existing arrangements are described below, followed by the consequences of the intended public offer announced by Recruit Holdings Co., Ltd.

Key management
A variable long-term remuneration has been set for key management for the period 2015-2018. The remuneration is conditionally settled in shares. In addition to the participant still being in the employment of the group at the time of unconditional granting, part (2/3) of the granting of the variable long-term remuneration is contingent on the financial targets of EBITA as a percentage of revenue and EBITA as a percentage of the gross margin. These can be reduced by up to 10% in the event that the DSO performance target is not met. The other part (1/3) of the remuneration is linked to qualitative targets relating to leadership, culture and sustainability.

The shares are conditionally granted after the first performance year. Final granting is postponed for a period of three years. The number of shares ultimately to be allocated at the end of the fourth year can increase or decrease by 20% based on a second performance assessment. This assessment takes place based on long-term sustainable value creation for shareholders. This sustainable value creation is measured against innovation and market share growth criteria. Innovation is measured against the return on investments in, and integration of, new applications for the group’s business model. This is assessed annually based on pre-determined targets. A three-year average determines the ultimate result for the long-term remuneration. Growth in market share is measured annually for each country and segment and consolidated at group level based on a three-year average.

The wage tax owed is payable by the group, which will be recognised as a transaction settled in cash.

The movement and the parameters were as disclosed below:

2015

KEY-MANAGEMENT

SETTLED IN SHARES

SETTLED IN
CASH

Number of participants

2

Balance as at 1 January

-

Conditionally granted

90,000

Withdrawn

-16,930

Balance as at 31 December

73,070

Fair value

€ 11.54

€ 12.21

Average share price for the determination of fair value

€ 12.85

€ 13.40

Dividend yield

3%

3%

Volatility

42%

35%

Risk-free interest rate

0.0%

0.0%

The number of shares stated in the table is based on performance factors achieved in 2015.

Other senior management
The Unique Share Plan for other senior management members also relates to the 2015-2018 period. The unconditional granting of shares will take place in May 2019. In addition to the participant still being in the employment of the group at the time of unconditional granting, the performance criteria are based on the extent to which targets relating to financial results are met. The number of shares conditionally granted in each performance year varies from 0% to 200% of the norm number of shares and depends on the extent to which group revenue in a country grows compared to the growth of the market in the respective country.

In determining the costs of this share plan the 2015 performance criteria take into account an average factor of 120%.

The movement and the parameters were as disclosed below:

OTHER

2015

SETTLED IN
SHARES

Number of participants

51

Balance as at 1 January

-

Conditionally granted

467,834

Withdrawn

-58,854

Balance as at 31 December

408,980

Fair value

€ 11.09 - € 13.63

Average share price for the determination of fair value

€ 12.34 - € 14.90

Dividend yield

2% - 3%

Volatility

40%

Risk-free interest rate

0.0%

The number of shares stated in the table is based on performance factors achieved in 2015 and the maximum performance factors set for 2016 - 2018.

Determination of fair value
The fair value of both share plans was determined using the Black-Scholes model, with expected volatility being based on historic volatility over a period equal to the remaining term of the share plans and the risk-free interest rate being based on the AAA-rated euro area government bonds applying to the remaining term of the share plans. In determining fair value while taking into account a grossing up of the settlement due to the wage tax to be paid by the group, the intrinsic value of share-based payments settled in cash is equal to the share price.

Adjustment of variable long-term remuneration
As a result of the intended public offer announced by Recruit Holdings Co., Ltd. on 22 December 2015 existing entitlements relating to the variable long-term remuneration of both key management and other senior management will be settled in cash instead of in shares if the offer is declared unconditional which, for the measurement of the liability, is expected to be in the second quarter of 2016. As a result the variable long-term remuneration has been recognised as a cash-settled remuneration plan in accordance with IFRS 2. The settlement of the variable long-term remuneration will be effected at € 13.40 per share, the closing share price on the day prior to the announcement of the intended public offer.

The above has resulted in a change in both the measurement and moment of unconditional granting. For valuation purposes the actual value of the shares granted is determined at the moment immediately before and after the granting is adjusted to determine the incremental actual value, which is set at € 1.10 per share. This determines the adjusted actual value of the granting. The costs were then accounted for proportionally in the income statement. In addition the initial period after which the shares are unconditionally granted will be shortened from four years to 18 months. The liability for the variable long-term remuneration settled in cash, including the wage tax payable by the group relating to these shares, has also been adjusted proportionally. This resulted in an additional charge of € 1,458 in the income statement for 2015.

USG People SAR plan

At the end of 2015 the USG People SAR plan 2011 - 2014 and the USG People SAR plan 2015 - 2018 came into effect. The only performance criterion for unconditional settlement after three years is that the participant is still employed by the group at the time of settlement. The USG People SAR plan is granted to the management that does not take part in the aforementioned share plans. Settlement will take place in cash and will equate to the difference between the share price in May 2013 (€ 5.91), May 2014 (€ 11.33) and May 2015 (€ 11.81), respectively, and the share price at the moment of unconditional settlement. Settlement after three years will be postponed by six months if the distributable amount for each SAR is less than € 1. If after this six-month period the distributable amount is still less than € 1, settlement will once again be postponed for six months. If the distributable amount is still less than € 1 after this period, no settlement will take place.

During 2015 the SARs relating to May 2011 were withdrawn without being settled and € 550 was distributed relating to the SARs from May 2012. At the end of 2015 the number of outstanding SARs was 384,330 (2014: 476,800). In the course of the year 152,030 SARs were granted, 139,410 SARs were withdrawn and 105,090 SARs were settled.

As a result of the intended public offer announced by Recruit Holdings Co., Ltd., settlement of all outstanding SARs will take place at a share price of € 13.40 as from the moment that the offer is declared unconditonal. The value of the SARs is determined in line with the conditions stated above. At the end of 2015 the measurement of the liability relating to the SAR plan was adjusted accordingly. This resulted in an additional charge of € 467 in the income statement for 2015.

The total costs of the SAR plan in 2015 totaled € 1,472 (2014: € 248). An amount of € 1,570 (2014: € 640) is included in the provisions.