Note 6. Salaries and remunerations

The Group’s pension costs and pension liabilities relating to the Board of Directors, presidents and vice presidents amounts to SEK 30 (30) million and SEK 244 (263) million respectively. SEK 66 (67) million of the pension liabilities is covered by the Alfa Laval Pension Fund.

Equity compensation benefits

During the period 2022 to 2023 no equity related benefits existed within Alfa Laval.

Variable remunerations

All employees have either a fixed salary or a fixed base salary. For certain personnel categories the remuneration package also includes a variable element. This relates to personnel categorises where it is customary or part of a market offer to pay a variable part. Variable remunerations are most common in sales related jobs and on higher managerial positions. Normally the variable part constitutes a minor part of the total remuneration package.

Cash-based long-term incentive programme

The Board of Directors decided in 2023 to implement step six of the modified cash based long-term incentive programme for maximum 95 senior managers in the Group including the Chief Executive Officer and the persons defined as executive officers. The outcome of the modified programme depends on how the adjusted EBITA margin and the net sales growth have developed during the three-year period, with a 50/50 weight between the targets. This means that there will be no award during the first two years since it is first in year three that it can be determined to what extent the targets have been achieved. Maximum outcome is awarded when the targets are exceeded. The remuneration from the modified long-term incentive programme can constitute maximum 25, 40 or 50 percent of the fixed remuneration depending on position. Payment to the participants in the programme is made after year three and only provided that they are still employed at the date of payment (except in case of termination of employment due to retirement, death or disability). If the employee resigns or is dismissed before the end of the three-year period, the employee will not be entitled to any pay-out. If the employee moves to a position that is not eligible for this programme, a pro-rata payment will be made after the end of the three year period. Paid remunerations from the long-term incentive programme do normally not affect the pensionable income or the holiday pay.

In 2023 step four, five and six of the modified programme were running in parallel.

The outcome of step four covering the period January 1, 2021 – December 31, 2023 was:

The performance targets were:

The actual outcome and the resulting award were:

There are three opportunity levels in the plan and the award per opportunity level and the total cost for the plan was:

Remuneration policy for executive officers

The remuneration policy for executive officers is established by the Annual General Meeting. The complete policy is found in Note 37.

The remunerations to the Chief Executive Officer/Managing Director are decided by the Board of Directors based on proposals from the Remuneration Committee according to the guidelines established by the Annual General Meeting. The remunerations to the other members of Group Management are decided by the Remuneration Committee according to the same guidelines. The principle used when deciding the remunerations to executive officers is to offer a competitive remuneration where the remuneration package is mainly based on a fixed monthly salary, with an option for a company car and in addition to that a variable remuneration of up to 50 percent of the salary (managing director up to 60 percent of the salary). The outcome of the variable remuneration depends on the level of fulfilment of the established mainly financial targets and to a limited extent also qualitative objectives. The guidelines for pension, termination and severance pay differ between the Chief Executive Officer/Managing Director and the other executive officers, see the below table.

The Board of Directors decided in 2023 to implement step six of the modified cash based long-term incentive programme for maximum 95 senior managers in the Group including the Chief Executive Officer and the persons defined as executive officers. The outcome of the modified programme depends on how the adjusted EBITA margin and the net sales growth have developed during a three-year period, with a 50/50 weight between the targets. This means that there will be no award during the first two years since it is first in year three that it can be determined to what extent the targets have been achieved. Maximum outcome is awarded when the targets are exceeded. The remuneration from the modified long-term incentive programme can constitute maximum 25, 40 or 50 percent of the fixed remuneration depending on position. Payment to the participants in the programme is made after year three and only provided that they are still employed at the date of payment.

1) Value of company car, housing benefit, taxable daily allowances, holiday pay and payment for vacation taken in cash.

2) Refers to what was paid during the year.

3) Defined contribution based.

4) Defined benefit based.

5) Based on current base salary.

6) From the age of 62. A defined contribution solution for early retirement with a premium of 15 percent of the pensionable salary.

7) If Alfa Laval terminates his employment:
–before the age of 64, he will receive 24 months’ base salary
–after the age of 64 he will receive 12 months’ base salary.

8) Maximum 2 years’ salary. The commitments define the conditions that must be fulfilled in order for them to become valid.

9) Is not included in the ITP plan. He has a defined contribution benefit comprising 50 percent of the base salary. In addition, he may exchange salary and variable remunerations for a temporary old age and family pension.

10) For salaries above 30 base amounts there is a defined contribution pension solution with a premium of 30 percent of the pensionable salary above 30 base amounts. Until May 1, 2012 the executive officers also had a special family pension that represented a supplement between the old age pension and the family pension according to ITP. For the persons that were executive officers on May 1, 2012 the special family pension has been converted to a premium based supplementary retirement pension based on the premium level in December 2011. In addition, they may exchange salary and variable remunerations for a temporary old age and family pension.

One of the other executive officers in Group Management, Mikael Tydén has left Group Management on September 30, 2023 due to a re-organisation. He will continue as Chairman of the Board for Tranter and LHE and focus on industrial relations as Senior Technical Advisor to Tom Erixon. His costs are included in the above table for the period he has been part of Group Management.

One of the other executive officers in Group Management, Jan Allde left the company on October 31, 2022 and his successor Fredrik Ekström joined Group Management on November 1, 2022. Their costs are included in the above table for the period they were part of Group Management.

Board of Directors

For 2023, the Board of Directors receive a total fixed remuneration of SEK 7,975 (7,170) thousand, which is distributed among the members elected at the Annual General Meeting that are not employed by the company. These Directors do not receive any variable remuneration.

The reported remunerations refer to the period between two Annual General Meetings.

The Chairman of the Board does not have any agreement on future retirement or severance pay with Alfa Laval.

The audit committee and the remuneration committee have had the following members during the last two years:

The members of the committees are appointed at the constituent meeting of the Board of Directors directly after the Annual General Meeting.