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 level.

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 2020, for example, around 27,600 employees worldwide (2019: around 25,400) participated in the “plus” share program.

BASF offers senior executives² the opportunity to participate in a share price-based compensation program, the long-term incentive (LTI) program. The BASF Group’s share price-based compensation program (BASF Option Program, BOP), which has existed since 1999, was offered for the last time in 2020. Around 87% of the people eligible to participate in the program around the world did so, investing up to 30% of their actual variable compensation (for the 2019 business year) in BASF shares. From 2020 onward, the previous LTI program for senior executives will be replaced by a new LTI (Strive!) in the form of a performance share plan. The new, four-year program takes into account the development of the total shareholder return and incentivizes the achievement of strategic growth, profitability and sustainability targets. To take part in this new LTI, participants must hold BASF shares, the amount of which is based on their individual fixed compensation. In 2020, around 94% of the people eligible to participate in the new LTI around the world did so, investing between 30% and 70% of their fixed annual compensation in BASF shares.

Personnel expenses

The BASF Group’s expenses for wages and salaries, social security contributions and pensions and assistance in 2020 totaled €10,576 million (2019: €10,924 million). This amount included proportional personnel expenses for 2020 from the disposal group for the construction chemicals business in the amount of €291 million. In 2019, personnel expenses from the disposal groups for the construction chemicals business and proportionally for the oil and gas business totaled €557 million. The decrease in personnel expenses was primarily due to lower bonus provisions and the lower average number of employees which resulted, in particular, from the divestiture of the construction chemicals business. A higher wage and salary level as well as higher pension expenses because of increased service costs had an offsetting effect.