Performance and Participation
Fair pay and an appropriate share in the Company’s success underpin the motivation and performance of our employees but also help to protect jobs and keep us competitive. Employee participation and co-determination rights for employee representatives are further key factors in the Volkswagen Group’s success, so we engage in dialogue with our employees to set standards for good work.
Fair Pay Anchored in Social Charter
In line with our Social Charter, all remuneration and benefits for a normal working week should be at least in line with the enforceable statutory minimum and should ensure that our employees and their families have an appropriate standard of living. When setting collectively agreed pay, the employer and the trade unions ensure that starting pay is in line with local minimum rates of pay. We make no distinction between female and male employees. Our first overseas plant to implement this, the Volkswagen do Brasil facility in Anchieta, is a beacon in this respect: the parties to the collective agreement agreed that starting pay for shop floor workers should be equivalent to 2.21 times Brazil’s statutory minimum wage.
Recognizing Performance and Sharing Profits
The systematic fostering and recognition of good performance is a vital element in our personnel management strategy, along with redesigning our pay system to ensure that employees have a sustainable share in the success and profits of the Company. Since 2010, Volkswagen AG has had detailed standard criteria for skills development and performance assessment. These criteria cover the entire workforce, from apprentices to top managers, and are underpinned by concrete incentive systems within a three-tier pay system:
- basic pay in the form of a competitive monthly salary
- a performance-related component, which rewards individual performance
- an entitlement to profit-sharing, which is laid down by collective agreement
This three-tier remuneration system is increasingly being rolled out across the Group. It gives us transparent criteria for recognizing good performance on the part of our employees and enables them to participate appropriately in the Company’s success. In 2014, employees at more than 30 Group locations benefited from profit-sharing, including those in China, Mexico, Poland, Russia and Spain.
As part of the introduction of a performance-related pay component, it was agreed that each employee of Volkswagen AG, Volkswagen Financial Services AG and Volkswagen Immobilien Service GmbH should have an annual appraisal with his or her line manager. This appraisal has two components, performance assessment and development planning. Recognizing and valuing good performance is just as important in this context as identifying individual potential or specific further training needs. Since 2013, all temporary external personnel employed at Volkswagen AG have also benefited from a performance-related pay component from their second year with Volkswagen. The process by which this component is determined is similar to the individual annual employee appraisal process for Volkswagen employees.
The system of appraisals, which is linked in part to a performance-related pay component, is gradually being rolled out across Group brands and companies. It was introduced for all employees covered by collective bargaining at Volkswagen Group Rus in Kaluga (Russia) in 2013 and at Bentley Motors Ltd. in Crewe (United Kingdom) in 2014.
As part of the introduction of a performance-related pay component, it was agreed that each employee of Volkswagen AG, Volkswagen Financial Services AG and Volkswagen Immobilien Service GmbH should have an annual appraisal with his or her line manager.
Long-Term Incentive for Management
The pay for management employees across the Group includes three variable components:
- the personal performance bonus,
- the Company bonus and
- the Long Term Incentive (LTI), introduced in 2010.
The LTI is calculated over a four-year period, making it the component that reflects sustainable development by the Company. Components of this kind were required by the 2009 legislation on remuneration of Board of Management members, but the LTI is applied more widely at the Volkswagen Group to the whole of its management. The Long Term Incentive is linked directly to the goals set out in the Group’s Strategy 2018: top employer status and top ratings for customer satisfaction, sales and profitability.
Collective Agreements in 2014
There was no collective bargaining within the Volkswagen Group in Germany in 2014, but 12 collective agreements were concluded at locations outside Germany. In some cases, there was a move towards long-term agreements that protect employment and boost competitiveness. For example, Volkswagen Slovakia, Sitech Polska and Volkswagen India all signed agreements running for more than 30 months.
Flexibility and Employment Security
Within the Volkswagen Group we use a wide range of flexibility tools to help maintain competitiveness and protect jobs. In 2014, we again responded rapidly to changes in the business environment. Some 200 Portuguese production staff from Volkswagen Autoeuropa continued to work at Volkswagen AG in Wolfsburg. Under the collective agreement on sustainable site retention and employment security, all Volkswagen AG employees enjoy employment security.
Employing Former Apprentices
Volkswagen AG is bound by an agreement that provides for apprentices to be given permanent employment on completion of their training, subject to specific performance criteria. Former apprentices who do not meet these criteria are initially offered a two-year fixed-term contract. After two years, the performance assessment that forms part of their individual annual appraisal and regular feedback are used to decide whether to take them on permanently.
Recruiting Local Personnel
Volkswagen supports the recruitment and qualification of local personnel as a way of developing the local communities and regions in which we operate. This applies for example at the new Audi México plant and at the new plant in Urumqi (China), where we plan to employ the groups that make up the region’s population on a pro rata basis.
Participation and Co-Determination
Within the Volkswagen Group there are many different forms of employee representation, but in most cases, employees are represented in two ways: by their trade union, and by a company representative body. Most of these company bodies are elected by all local employees and so represent the interests of the employees within the Company. Trade unions primarily represent the interests of their members. This principle of twin representation of employees has proved successful across the Volkswagen Group. When substantial changes are being planned in the Company, employee representatives are involved in the process from an early stage, a provision that is written into the global agreement on cooperation between Group management, the Group European Works Council and the Group Global Works Council.
Trade Union Organization
The shop floor employees in 98% of all fully consolidated Volkswagen Group companies are represented by a trade union or covered by collective agreement. At the Audi México plant in San José Chiapa, which is still under construction, the newly created trade union SITAUDI was officially registered in December 2013.
Charter on Labour Relations
The Group-wide International Charter on Labour Relations first came into force in 2009. It sets out the practical implementation of the right to participation and links increased participation rights with shared responsibility. The Charter applies internationally and provides for phased rights to information, consultation and co-determination for employee representatives of the brands and companies represented on the Group Global Works Council. The rights it guarantees employee representatives relate, among other areas, to personnel management and industrial relations provisions, work organization, remuneration systems, information and communications, initial and in-service training, occupational health and safety, process controlling, and social and environmental sustainability. The Group Global Works Council and Company management regularly monitor implementation of the Charter on Labour Relations in individual Group companies.
Local Implementation of Co-Determination
Since the Charter on Labour Relations was introduced in 2009, management and employee representatives at many locations outside Germany have negotiated declarations of intent and outlined implementation arrangements. 2014 also saw new plant-level agreements being concluded at ŠKODA India and Volkswagen Sarajevo. Other Group locations, such as the ŠKODA plant in Kvasiny in the Czech Republic, held inaugural works meetings. Employees at the Volkswagen plant in Kaluga (Russia) elected social partners to represent their concerns. And in many locations, including Volkswagen Group Italia and MAN in Steyr (Austria), the work of local employee representatives is now being organized within special committees and was stepped up in 2014. Many locations also held training workshops in 2014 to help employee representatives to implement the Charter on Labour Relations locally: these included MAN Steyr, Volkswagen Navarra, Volkswagen Sarajevo and Volkswagen India Pune alongside workshops for the sales and financial services companies Volkswagen Group Italia and Volkswagen Group Polska.
Developing Employee Representation Structures
An agreement was signed at Group Global Works Council level in 2014 providing for a Mechanical Engineering Committee to be convened, comprising employee representatives from Volkswagen AG, MAN Diesel & Turbo SE, and Renk AG. This joins the Commercial Vehicles Committee, which was set up in 2012 to bring together employee representatives from the Scania, MAN and Volkswagen Commercial Vehicles brands, and the Sales and Financial Services Committee, set up in 2008. To improve the situation of workers, working conditions, participation rights and employment security in the Group’s Chinese joint ventures, a Liaison and Coordinating Committee was set up back in 2008, which meets twice a year and discusses industrial relations within the Group in China. It also discusses a wide range of specialist issues, such as the Global Charter on Labour Relations, occupational safety, and vocational education and training.
Charter on Temporary Work
The Charter on Temporary Work, signed in November 2012, represents agreement between Group management, the Group European Works Council and the Group Global Works Council on the key principles governing the use of temporary work across the Group. The main provisions of the Charter relate to:
- The reasonable use of temporary work as a key flexibility tool
- Implementation of equal pay with reference to the standard basic salary
- Implementation of equal treatment: temporary external personnel should enjoy parity of employment conditions and training provision with the core workforce
This Charter offers all temporary external personnel the chance to be moved on to a permanent contract provided they have the necessary skills and the Company has a need for those skills.
The Employee Opinion Survey
The Group-wide Employee Opinion Survey, or “Stimmungsbarometer”, regularly measures employee satisfaction. Once the survey is complete, the findings are jointly discussed by supervisors and employees, focusing on complaints and problems as well as on suggestions for improving work organization. Together, supervisors and employees define the necessary measures required to trigger and implement change. The employee opinion survey was conducted for the seventh time in 2014. The survey covered 150 locations and companies in 44 countries. Out of the more than 490,000 employees at the brands and companies that have already implemented the employee opinion survey, over 440,000 employees took part. This equates to a response rate of 89 percent, which was the same as in 2013. Companies taking part for the first time in 2014 included Porsche Leipzig GmbH, subsidiaries of Porsche AG, Ducati Motor Holding spa, MAN Diesel & Turbo, MAN Latin America, Volkswagen Automatic Transmission (Tianjin), Volkswagen R & Accessory China, and ŠKODA Auto Deutschland. 28
Employee Satisfaction Index – Alongside the employee response rate, the key indicator generated by the Employee Opinion Survey is the Employee Satisfaction Index,, which is compiled from the responses to 11 questions. During the reporting year, the score on this indicator was 79 out of 100, the same as in 2013.
Under the Ideas Management program our employees use their creativity, knowledge and initiative to improve both processes and products. Ideas management is a vital management and motivational tool and has been an integral part of Volkswagen’s culture of improvement for the past 65 years. The ideas management process also helps to make working at Volkswagen both safer and healthier.
Ideas Management in the Volkswagen Group*
|Savings (€ million)
|Bonuses (€ million)
* 31 participating production locations (2013: 31) as per December 31, 2014.
The “Volkswagen Way”
The “Volkswagen Way” is a central and successful tool for securing continuous improvement. At its core is a process of continuous improvement that aims permanently to develop productivity and quality as well as ergonomics, leadership and teamwork. In 2014, the focus was on optimizing overarching workflows. In July 2014, the first “Volkswagen Way” symposium was held for the Technical Development department at the Wolfsburg plant.
We want to offer many of our employees the opportunity to drive a vehicle from at least one Group brand and are continually improving the framework for doing this. The terms of this benefit must be affordable for the employee and commercially viable for the brands.
Employees of Group companies around the world also enjoy further company benefits: these may include subsidized transport and meals, low-cost accommodation, monthly childcare allowances, and discounts on selected leisure activities. Additional health care benefits round off the range of company benefits. Since 2014, employees at Volkswagen AG, AUDI AG and a further nine Group companies in Germany have benefited from reduced-price rail travel under the “Job-Ticket” scheme. Volkswagen AG also contributes to the benefits provided by social insurance schemes, such as sick pay, and supports dependents when an employee dies. The Company also has a collective accident insurance policy that covers all employees against accidents resulting in death or invalidity. In exceptional cases of economic hardship, Volkswagen AG grants employees a short-term loan.
The Company Pension Plan
Volkswagen AG, all its brands and all its subsidiaries in Germany run company pension plans to ensure that former employees have a source of income in retirement. At Volkswagen AG, the arrangements comprise a basic pension and contributory pensions I and II. The basic pension and contributory pension I are employer-funded, while contributory pension II offers employees an opportunity to convert part of their pre-tax salary into pension contributions. Since 2001, payments to Volkswagen AG’s Company pension plan have been invested in the capital markets by the scheme, which is administered in trust by the Volkswagen Pension Trust e. V. By the end of 2014, 22 other Group companies in Germany were also using these arrangements. Employees can also make direct contributions to their own pension provision by converting a proportion of their salary into pension contributions.
The Time Asset Bond
Volkswagen AG’s Time Asset Bond is a scheme to reduce the length of an employee’s working life. Since 1998, the Bond has offered employees the chance to contribute to it out of their gross salary or their working time credits. Their contributions are invested in the capital markets by the Time Asset Fund, which is administered in trust by the Volkswagen Pension Trust. The time assets accumulated can then be used to enable employees to take paid time off in the run-up to retirement.