Westjet 2010 Annual Report Download - page 27

WestJet 2010 Annual Report 25
Salaries and benefits are determined via a framework of job
levels based on internal experience and external market data.
During 2010, salaries and benefits increased by 12.0 per cent
to $439.8 million from $392.7 million in 2009. This increase
was due primarily to an increase in our total number of full-
time equivalent employees of 9.3 per cent to 6,877 employees;
higher pilot salaries and benefits resulting from the new pilot
agreement effective July 1, 2009; a cash payout of $1.5 million
related to the departure of our previous CEO; and annual market
and merit increases. Salaries and benefits expense for each
department is included in the respective department’s operating
expense line item.
Employee share purchase plan (ESPP)
Our ESPP encourages employees to become owners of WestJet
shares. Under the terms of the ESPP, WestJetters may acquire
voting shares of WestJet at the current fair market value up
to a maximum of 20 per cent of their gross pay, and these
acquisitions are matched by WestJet. As at December 31, 2010,
84 per cent of our eligible active employees participated in the
ESPP, contributing an average of 13 per cent. During the year
ended December 31, 2010, we matched contributions for every
dollar contributed by our employees. Under the terms of the
ESPP, we have the option to acquire voting shares on behalf of
employees through open market purchases or to issue shares
from treasury at the current market price, which is determined
based on the volume-weighted average trading price of the
common shares for the five trading days preceding the issuance.
For the year ended December 31, 2010, all ESPP matching
shares were acquired through the open market. For the year
ended 2010, our matching expense was $52.6 million, an
11.9 per cent increase from 2009, driven primarily by an increase
in salary expense, as well as a greater number of participating
WestJetters in the ESPP versus a year ago.
Employee profit share
All employees are eligible to participate in the employee profit
sharing plan. As the profit share system is a variable cost,
employees receive larger awards when we are more profitable.
Conversely, the amount distributed to employees is reduced and
adjusted in less profitable periods. Our profit share expense for the
year ended December 31, 2010, was $22.2 million, a 51.4 per cent
increase from $14.7 million in 2009. This increase was directly
attributable to higher earnings eligible for profit share versus
the prior year. As a result of our continued profitability, we were
pleased that our WestJetters earned a bonus payout of over
5 per cent of their salaries and benefits in 2010. This brings our
total profit share payout since 1996 to approximately $200 million.
Twelve months ended December 31
($ in thousands) 2010 2009 Change
Salaries and benefi ts $ 439,750 $ 392,749 12.0%
Employee share purchase plan 52,643 47,030 11.9%
Employee profi t share 22,222 14,675 51.4%
Stock option plan 11,103 12,045 (7.8%)
Key employee and pilot plan 977 — N/A
Executive share unit plan 3,588 1,395 157.2%
$ 530,283 $ 467,894 13.3%
of our aircraft cycles flown attributable to our owned aircraft is
reduced as a percentage of our total cycles flown.
Compensation
Our compensation philosophy is designed to align corporate
and personal success. We have designed a compensation plan
whereby a portion of our expenses are variable and are tied to
our financial results. Our compensation strategy encourages
employees to become owners in WestJet, which creates a personal
vested interest in our financial results and accomplishments.