Compensation and Benefits

• Compensation based on employee’s position and individual performance as well as company’s success
• ROCE determines variable compensation

We want to attract engaged and qualified employees, retain them and motivate them to achieve top performance with an attractive package including market-oriented compensation, individual development opportunities and a good working environment so that they contribute to the company’s long-term success. Our employees’ compensation is based on global compensation principles according to position, market and performance. As a rule, compensation comprises fixed and variable components as well as benefits that often exceed legal requirements. In many countries, these benefits include company pension benefits, supplementary health insurance and share programs. We regularly review our compensation systems at local and regional levels. We want our employees to contribute to the company’s long-term success. This is why the compensation granted to the vast majority of our employees includes variable compensation components, with which they participate in the success of the BASF Group as a whole and are recognized for their individual performance. The same principles basically apply for all employees worldwide. The amount of the variable component is determined by economic success as well as the employee’s individual performance. We use the BASF Group’s return on capital employed (ROCE) to measure economic success for the purposes of variable compensation. This links variable compensation to our ROCE target.¹ Individual performance is assessed as part of a globally consistent performance management process. In numerous Group companies, our “plus” share program ensures employees’ long-term participation in the company’s success through incentive shares. In 2019, for example, around 25,400 employees worldwide (2018: 25,600) participated in the “plus” share program. BASF offers senior executives the opportunity to participate in a share price-based compensation program, the long-term incentive (LTI) program. In 2019, 90% of the approximately 1,100 people eligible to participate in the LTI program worldwide did so, investing up to 30% of their variable compensation in BASF shares. From 2020 onward, the previous LTI program for senior executives will be replaced by a new program. The new program will incentivize the development of the total shareholder return, as well as the achievement of strategic growth, profitability and sustainability targets.

Personnel expenses

The BASF Group’s expenses for wages and salaries, social security contributions and pensions and assistance in 2019 totaled €10,924 million (2018: €10,659 million). In 2019, this amount included personnel expenses from the disposal group for the construction chemicals business and proportionally for the oil and gas business in the amount of €557 million. By contrast, the amount in 2018 included personnel expenses from the disposal group for the oil and gas business in the amount of €276 million. The increase in personnel expenses was due primarily to higher expenses for the long-term incentive program, a higher level of wages and salaries and the higher average number of employees resulting from the acquisition of significant parts of Bayer’s business. Offsetting factors were the merger of the oil and gas businesses of BASF and DEA in the joint venture Wintershall Dea, as well as the decrease in expenses for pension benefits due to plan curtailments.