2.6 Financial and Non-Financial Incentives for Employees

The financial motivation system is aimed at creating Gazprom's competitive advantage as the employer and making sure that each employee is interested in his/her work results.

PJSC Gazprom and its entities use uniform corporate-wide labour remuneration norms that are governed by PJSC Gazprom Employee Remuneration Management Policy.

The goal of the Policy is to create conditions for recruitment and retention of personnel with required qualifications, to incentivize employees to carry out tasks at hand. The Policy applies to all Gazprom Group entities.

The employee remuneration level depends upon the qualifications, professional aptitude, complexity of the work performed, labour conditions and the results of performing the tasks assigned.

In accordance with the principles stipulated in the Policy, the fixed part of remuneration (salaries/ tariff rates) and the variable part (extra payments, allowances and bonuses) shall be paid.

The effective remuneration systems stipulate:

• Setting salaries and tariff rates taking into account the qualifications and professional aptitude;
• Monthly performance bonuses;
• Extra payments and allowances depending on labour conditions and workload;
• One-off excellence bonuses (for commissioning new production facilities and construction projects, installation of the new equipment, energy resources saving, discovery of new hydrocarbon deposits);
• Year-end performance bonuses.

Competitive salaries. Salaries and tariff rates are increased annually subject to the projected growth of the consumer price index based on the information of the Ministry of Economic Development of the Russian Federation. From January 1, 2018, the salaries were increased by 3.7%.

The Gazprom Group's remuneration level is compared regularly with the market salary level. The analysis performed shows that Gazprom Group salaries and wages are competitive.

Motivational labour remuneration.Gazprom incentivizes the employees to perform the tasks at hand by linking the amount of bonus payments with employees’ performance. In 2018, the Employee Remuneration Regulations of the subsidiaries engaged in the core business were amended to provide for application of the Recommendations Aimed at the Improvement of the System of Performance Bonuses to Employees of PJSC Gazprom entities for Industrial and Economic Activities. The purpose of the Recommendations is to build uniform approaches to establishment of a link between employee performance and the bonuses on the basis of bonus pay targets.

Establishing the executives’ annual bonuses in accordance with performance. The annual bonuses system is used to incentivize the executives to achieve the key performance targets of the Gazprom Group.

The annual bonus is accrued and paid in accordance with the Regulation on Annual Bonus System for PJSC Gazprom Executives approved by Resolution of OJSC Gazprom Board of Directors No. 927 dated December 19, 2006.

The Regulation on Annual Bonus System applies to PJSC Gazprom officers and executives, from heads of divisions and above, as well as directors general, their deputies and chief accountants of subsidiaries, performing core operations.

The following criteria are used to evaluate performance of executives:

• Corporate-wide KPIs that characterize performance of the Gazprom Group as a whole across the most important areas of operations;
• Key performance indicators of subsidiaries, which reflect performance;
• Individual targets of executives set specifically for each executive within the framework of their functional area of responsibility.

Gazprom has a program of stock options available to executives. Its purpose is to additionally incentivize executives financially and motivate them to boost the market value of the Company’s stock.

Participation in the program is open for PJSC Gazprom executives holding positions of department heads and above, and to executives of core business subsidiaries. In 2018, 70 executives were entitled to take part in the program.

To drive employee motivation and performance related to personnel development, as well as to promote professional achievements and best practices, Gazprom holds regular professional excellence competitions.

In 2018, PJSC Gazprom held the first Labour (Professional Excellence) Festival among the subsidiaries. Employees competed for the Award of Excellence in six professional areas of the Group operations: chemistry lab technician, compressor operator, gas distributing plant operator, instrument technician, linear pipe layer, oil and gas production operator.

During the Festival, several Professional Excellence Competitions were held at PJSC Gazprom subsidiaries, as well as The Best Trainer of PJSC Gazprom Subsidiary Training and Education Unit — 2018 and the 19^th Corporate Computer Engineering and Information Technology Competition.

In June 2018, prizes were awarded to the winners of the 9^th Corporate Competition of Public and Media Relations Services of PJSC Gazprom Subsidiaries and Entities. The purpose of the competition is to make corporate media more professional, promote creative activities and initiative of PR specialists at subsidiaries.

In addition, non-financial incentives include traditional awards to the best employees, in particular, the corporate badges of merit, letters of commendation, honorary titles, citations. Gazprom professionals also receive government awards annually.