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STEELCO GUJARAT LTD Page No

HUMAN RESOURCE & ADMINISTRATION DEPARTMENT

DRAFT : ANNUAL PERFORMANCE LINKED INCENTIVE

Prepared by Reviewed by Issued by

Head : HR & Admin

HR Committee Managing Director

1. PREAMBLE :

The scheme shall be called “Annual Performance Linked Incentive Scheme”

for the Steelco executives. The main consideration while designing the

scheme are:

1.1 Quantum of Incentive should be enough to motivate the employees to

put extra efforts while at the same time ensuring the payments are

consistent in economic terms with the level of the performance.

1.2 The scheme should have the characteristics of Simplicity, Objectivity,

Smooth Operatibility and Amenability to unambiguous calculations..

2. OBJECTIVE:

The Annual Performance Linked Incentive (APLI) is defined as the variable

part of the pay which is awarded each year depending on the performance.

APLI scheme is applied at the individual Executive employee level

The main objective of this scheme is to promote Motivation, Moral and foster

Team spirit among the employees. Besides boosting their performance related

towards the business objectives set by the top management. To qualify for the

APLI, the executive must achieve excellence in the delivery of services and





Head : HR & Admin


other performance commitments as defined under his / her personal “ Key

Performance Indicators / Key Responsibility Area” matrix.

3. SCOPE:

Annual Performance Linked Insensitive scheme shall cover all executives

(other than Staff & Workmen, Trainees / Apprentices) of the Steelco Gujarat

Ltd. The benefit under the scheme, shall be payable to the employees who are

on the rolls of the company during the year under review provided he/she has

worked for not less than six months in that year. However, the payment will be

made on pro – rata basis to such candidates.

4. POLICY YEAR:

The computing of Annual Performance Linked Incentives will be based on the

Financial Year i.e. from 01st April to 31st March.

5. METHOD:

The personal performance is not only measured in terms of specific KPI, but

also in terms of achieving desired goals and outcomes covering his / her area

of responsibilities. Performance is effective service delivery and

responsiveness to stakeholders. It is the shift from inputs – process emphasis

(efficiency) to results and outcomes (effectiveness).





Head : HR & Admin


The proposed methodology for the APLI consists of the following steps :

STEP – 1: Select Key Departmental Objectives

Objectives represent the development requirements to be achieved by the

department in a particular set of policies and programs over a specific period

of time (short – medium- long) . Individual objectives should be linked and

derived from the Departmental Vision and Mission statement.

STEP – 2: Assign Relative Weights to Objectives

Objectives in the Performance Management system should be ranked on

priority according to the degree of significance and specific weights should be

attached to these objectives. All weights must add to 100.

STEP – 3: Specify Means for Achieving Objectives

For each objectives, the department must specify the required actions

(Policies, Programs, Schemes & Projects) to achieve the objective.

STEP – 4: Specify Success Indicators

For each of the means specified in Step 3, we must specify one or more

success indicators or key Performance Indicators (KPIs) Success indicators

are important management tools for driving improvements in departmental

performance.





Head : HR & Admin


The KPI should represent the main business of Steelco and should also aid

accountability. The weight assigned to a particular objective should be spread

across the relevant success indicators.

STEP – 5: Specify Targets for success Indicators

The next step is to choose a target for each success indicator. In setting

targets, we should consider the best mix of volume, quality, efficiency,

financial performance and customer (Internal / External) service targets given

their priorities.. A good set of targets can balance the pursuit of improved

service delivery with the need to provide value for money.

Targets are tools for driving personal performance improvements. Target

levels should, therefore, contain an element of stretch and ambition. However,

they must also be achievable. The target should be presented as the following

FIVE POINT scale:

Parameter Excellent (5) Very Good

(4)

Good (3) Fair /

Average (2)

Poor (1)

Target* 110 100 75 50 25

(Note: Target figures are given as example only)





Head : HR & Admin


6. PERIODICITY OF PAYMENT

As nomenclature suggest, Annual Performance Linked Incentive (APLI) shall be

calculated once in a year, i.e. after the end of financial year. Financial year shall

be the year of evaluation and is deemed as period from 01st April to 31st March.

7. GENERAL CONDITIONS

The amount of APLI earnings will neither be termed as pay nor allowance, nor

wages. Accordingly, this amount would not count for any service benefits (PF,

Gratuity, etc.). The figure of achievement and other record as maintained by the

management shall be final and binding to all.

The scheme may be reviewed, if required, and the management has a right to

revise performance parameters, tables, eligibility criterion, payment criterion, etc.

appearing in the scheme, as appropriate.

In case of any ambiguity in defining and explaining the provisions of the scheme,

the matter shall be referred to the Managing Director only. The management

reserve the right of shutting down Annual Performance Linked Incentive Scheme

for reasons beyond its control.

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