NOTE 27. EMPLOYEE BENEFITS
CONSOLIDATED
2015
2014
$m
$m
A. EMPLOYEE BENEFITS PROVISION
Annual leave
101
98
Long service leave
90
86
Cash based incentive arrangements
110
106
Defined benefit superannuation plans
16
39
Other employee benefits
*
7
8
324
337
* There is one defined benefit pension arrangement in Australia with a discounted liability of $5 million as at the current reporting date (2014-$6 million) involving 50
participants (2014-55) and one defined benefit pension arrangement in New Zealand with a discounted liability of $2 million as at the current reporting date
(2014-$2 million) involving 32 participants (2014-34). These liabilities are met from general assets rather than assets being set aside in trust.
The employee benefits provision includes $79 million (2014-$95 million) which is expected to be settled after more than 12 months
from reporting date.
B. CASH BASED INCENTIVE ARRANGEMENTS
I. Short term incentive plan
The short term incentive plan continued in operation during the current reporting year. Eligible employees have the capacity to earn a
proportion of their base pay as a cash incentive annually. The incentive opportunity is set depending on an employee's role and
responsibilities. The majority of employees are on a 10%, 15% or 20% plan. The incentive payments are determined based on an
assessment of individual performance and achievement of a range of business unit and individual goals.
NOTE 28. SHARE BASED REMUNERATION
The provision of share based remuneration creates a link between shareholder value creation and rewarding employees. Share based
remuneration encourages employee share ownership, links employee reward to the performance of the Group and assists with
retention of key personnel. This encourages employees to focus on creating shareholder value over the longer term.
The obligations under share based payment arrangements are covered by the on-market purchase of IAG ordinary shares which are
held in trust. The shares are purchased on or near grant date at the prevailing market price. The arrangements are managed using in-
house trusts, one for Australia and one for New Zealand, which are controlled for accounting purposes and are subsidiaries of the
Consolidated entity. The trustee for each trust is a subsidiary of the Consolidated entity. The trusts are administered externally.
The number of shares purchased to cover each allocation of rights is determined by the trustee based on independent actuarial
advice. The trusts allow for excess shares purchased in relation to one plan to be used to meet obligations of the other plans at the
trustee’s discretion. The average price per share at which the shares were purchased during the reporting period was $6.57 (2014-
$6.07). The trusts held 14,784,403 shares as at 30 June 2015 (2014-16,547,487 shares) representing 0.61% (2014-0.71%) of the
issued share capital. This includes shares that are not controlled for accounting purposes and so not recognised as treasury shares.
Trading in IAG ordinary shares that are awarded under the share based remuneration arrangements is covered by the same
restrictions that apply to all forms of share ownership by employees. These restrictions limit an employee trading in IAG ordinary
shares when they are in a position to be aware, or are aware, of price sensitive information.
Share based remuneration is provided through a range of different plans, each of which has different purposes and different rules.
The share based remuneration expense amounts are included in the claims expense, other underwriting expenses and fee based,
corporate and other expenses lines in the statement of comprehensive income.
A. SENIOR MANAGEMENT AND EXECUTIVE SHARE PLANS
The senior management and Executive share plan arrangements consist of two separate arrangements working together. These two
arrangements are the Deferred Award Rights Plan (DAR Plan) and Executive Performance Rights Plan (EPR Plan) which are detailed
below. The PARC approves the participation of each individual in the plans. Certain other share plan arrangements remain in place
but are closed to new offers.
I. Deferred Award Rights Plan
The DAR Plan is the deferred portion of the short term incentive issued as rights over IAG ordinary shares.
Key terms and conditions:
The rights are granted for nil consideration, are non-transferable, and can be settled only with existing IAG ordinary shares.
Holders do not receive dividends and do not have voting rights until the rights are exercised;
The vesting condition is not market-related and requires the participant to continue in relevant employment;
Where the rights vest (the holder becomes entitled to exercise the right), the plan entitles participating employees to acquire one
IAG ordinary share for each right. The exercise price of all vested rights is a nominal value of $1 per tranche of rights exercised;
The rights vest after a maximum two year period as determined by the Board subject to the participants continuing in relevant
employment for the full period. If there is a change of control of IAG, the Board has discretion to determine if and when rights
should vest; and
If the vesting condition is not met then the rights lapse. The rights also lapse where the holder chooses to forgo the rights and all
rights expire seven years from grant date where they have not previously lapsed or been exercised.
88 IAG ANNUAL REPORT 2015
