Westjet 2014 Annual Report Download - page 17

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WestJet Annual Report 2014│ 15
Compensation
Our compensation philosophy is designed to align corporate and personal success of our employees. We have created a
compensation program 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 operational accomplishments.
($ in thousands)
2014
2013
Change
Salaries and benefits 626,373 582,225 7.6%
Employee share purchase plan
79,942
73,010
9.5%
Employee profit share 68,787 51,577 33.4%
Share-based payment plans 18,626 14,533 28.2%
793,728 721,345 10.0%
Presentation on the Consolidated Statement of Earnings:
Airport operations 109,754 97,986 12.0%
Flight operations and navigational charges
254,018
218,483
16.3%
Sales and distribution 70,992 65,452 8.5%
Marketing, general and administration 95,301 95,156 0.2%
Inflight
133,183
137,990
(3.5%)
Maintenance 61,693 54,701 12.8%
Employee profit share
68,787
51,577
33.4%
793,728 721,345 10.0%
Salaries and benefits
Salaries and benefits are determined via a framework of job levels based on internal experience and external market data.
During 2014, salaries and benefits increased by 7.6 per cent to $626.4 million from $582.2 million in 2013. This increase was
primarily due to an increase in our total number of full-time-equivalent (FTE) employees and our annual market and merit
increases. Our total number of full-time equivalent employees increased 8.7 per cent to 8,698 at December 31, 2014 from
8,000 at the end of 2013 as a result of our growth. Salaries and benefits expense for each department is included in the
respective department’s operating expense line item, as presented in the table above.
Included in salaries and benefits is the expense associated with the Owners’ Performance Award which was originally
introduced in 2011. The Owners’ Performance Award is designed to recognize WestJetters for their efforts in four key areas:
safety, on-time performance, guest experience and cost. Approximately $4.7 million was recognized for this award in 2014
compared to $12.6 million in 2013 for this award, a decrease of 62.7 per cent. This decrease is mainly due to a maximum
payout in 2013 for the 2013 cost metric. Targets for each key area are set on an annual basis. The expense is recorded in
marketing, general and administration expense.
Employee share purchase plan (ESPP)
The ESPP encourages employees to become owners of WestJet shares and provides employees with the opportunity to
significantly enhance their earnings. Under the terms of the ESPP, WestJetters may, dependent on their employment
agreement, contribute up to a maximum of 10 per cent or 20 per cent of their gross salary to acquire voting shares of WestJet
at the current fair market value. The contributions are matched by WestJet and are required to be held within the ESPP for a
period of one year. At December 31, 2014, 83.2 per cent of our eligible active employees participated in the ESPP,
contributing an average of 15.1 per cent of their gross salaries. Under the terms of the ESPP, we acquire voting shares on
behalf of employees through open market purchases. For the year ended 2014, our matching expense was $79.9 million, a
9.5 per cent increase from $73.0 million in 2013, driven largely by the increased number of eligible employees compared to
the prior year.
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, 2014, was $68.8 million, a
33.4 per cent increase from $51.6 million in 2013, bringing our total profit share expense since 1996 to approximately $391
million. This year-over-year increase was directly attributable to higher earnings eligible for profit share versus the prior year.