EGSS Final+Report 130523

7/30/2019 EGSS Final+Report 130523

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Remuneration and Workforce

(Cost) Planning

Final report1st draft for discussion

20 May 2013

.


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2 2013 Deloitte Czech Republic

I. Introduction

II. Management Summary

III. Client Situation

IV. Internal Analysis Summary

V. External Analysis

VI. Workforce Cost Analysis

VII. Appendices

Table of Contents


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The goal of this project is to assess the impact of the planned growth of the EGSSemployee base on EGSSs cost effectiveness and the quality and productivity ofits workforce

1) Can workforce of the required profiles be found around Hodonin?

2) What will be the workforce cost implications of the planned EGSS growth?

Motto: How to keep personal expenses flat

The purpose of this document is to build upon the internal analysis (formulate assumptions and

specify recommendations), summarize and present the outcomes of the external labour marketanalysis (workforce structure and costs) and introduce scenarios of potential implications of the

market development on EGSS workforce structure and cost.

Two main

questions

2

Our

approach

3 Our comprehensive approach consisted of the analysis of current state as well as future developmentsof:

Data sources: Official statistics: Czech statistical office, Ministry of labor, Czech national bank, Labour offices, etc.

Deloittes proprietary databases (surveys, Deloitte Global Research Centre reports, project experience)

Labour market (workforce structure &

availability, HR management tools):

Current EGSS workforce HR management systems & tools

assessment and recommendations to

stay effective given the EGSS growth

Regional workforce demographics Unemployment and mobility Potential candidate sources in the

region (schools, labor office, peer

employers)

Workforce cost (incl. potential scenarios -optimistic, realistic, pessimistic):

Assessment and benchmarking of thecurrent EGSS compensation levels (base

pay, bonuses, benefits)

Remuneration costs in view of the EGSSheadcount growth and salary development

Tax implications and potential grants Onboarding and replacement costs Scenarios of EGSS workforce costs

development in the next 5 years (2013-18)

Internal

a

nalysis

(EGSS)

External

analysis

(market)

Aim of thisreport

1


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I. Introduction






VII. Appendices

Table of Contents


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2013 2014 2015 2016 2017 2018

Total Remuneration 11 603 13 235 14 170 14 485 14 855 15 238

Total team costs 13 200 13 278 14 223 14 538 14 918 15 303

Grand total team costs 13 200 13 278 14 223 14 538 14 918 15 303

Domestic payments

Slovakia

Favorable availability of required

workforce

Total Remuneration 0 11 909 13 623 14 376 14 743 15 122

Total team costs 0 13 842 13 676 14 430 14 806 15 187

Grand total team costs 0 13 842 13 676 14 430 14 806 15 187

Domestic payments

Austria

Favorable availability of required

workforce

Total Remuneration 11 614 13 261 14 257 14 573 14 946 15 333

Total team costs 13 211 13 304 14 309 14 626 15 009 15 398

Attraction premiums 0 509 509 509 509 509Grand total team costs 13 211 13 813 14 817 15 135 15 518 15 906

Domestic payments

Hungary

Moderate risk of unavailability WF in

Hodonn. Hiring from Trnava region

would require attraction premiums.


Total team costs 0 19 731 16 646 18 002 18 856 19 379


SecuritiesAttraction of Professionals from Brno

Reaching the target careerstructure: 2017 (fully operational)


Total team costs 0 21 065 17 358 15 933 19 642 20 193


TreasuryAttraction of Professionals from Brno



Total team costs 0 17 951 14 728 15 311 16 850 17 992


SecuritiesLong-term junior staff development


Total Remuneration 0 11 826 13 063 15 552 16 655 18 499Total team costs 0 18 793 15 498 15 712 16 843 18 694


TreasuryLong-term junior staff development


Yearly costs per FTE (EUR)Costs structure

Q1: Workforce availability Q2: Workforce costs implications

(most likely scenario)

Team &

scenarioDescription

A

A

B

B

Trnava(SR)

Motto: How to keep personal expenses flatKeeping the current average Perex flat long-term seems unrealistic due to a couple of facts low current salaries (below the market), market movement and pressures on EGSS to keep upwith the market to keep attrition down, most employees at BOF1 levels (expecting to grow in career), etc. Total Perex costs may be optimized through higher productivity and lower

headcounts (this change can be supported by transformation of the compensation system toward more commission-like system) to be discussed over our analysis and model.

High availability of required WF

Required workforce is available and possible to recruit in the Hodonn region

or alternatively in Brno and Trnava with different workforce costs implications

Include salary, bonuses, benefits. Include mentoring onboarding costs, fluctuation costs.3 Include attrition premium cost.

Low availability of required WF

Legend:


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I. Introduction






VII. Appendices

Table of Contents


7/697 2013 Deloitte Czech Republic

Erste Group Bank (EGB) has been considering expanding the accountabilities and thusworkforce of EGSS by nearshoring specific functions from various EGB locations andcentralizing them in Hodonn in the respective timing and FTE volumes

Team Current

location

Timing FTEs to

EGSS

Sub

Total

FTEs

Total

FTEs

Domestic

payments

Slovakia Q3/2013 23,7

74,48

204,59

Hungary Q3/2013 22,5

Austria Q2-3/2014 28,28

Securities Austria Q1-2/2014 47,01

91,99Q1/2015 26,12

Q1/2016 18,86

Treasury Austria Q1-2/2014 13,64

38,12Q1/2015 24,48

Q1/2016 -

Planned recruitment phases in EGSS (Sec.&Try to be confirmed):

Team Servicing FTEs in

EGSS

Total

FTEs

Foreign payments Czech rep. 12,875

83,375

Holding 12,5

Domestic payments Czech rep. 42

Foreign cheques Holding 6

Investigations Holding 7

Other (admin) EGSS 3

Current workforce in EGSS:

(excl. EGSS top management)

Total targeted EGSS headcount in 2016: 288 FTEs

Headcount(FTEs)

Planned EGSS headcount growth (timeline)

Functions to be nearshored:



I. Introduction






VII. Appendices

Table of Contents



Internal analysis, as the first phase of project, focused on internal workforce supply andaimed to evaluate the current HR management systems and tools used in EGSS,compare them with the best market practice and formulate recommendations

Job Profiles

Demographics

Remuneration

& motivation

Performance

management

Development

& trainings

Career model

Recruitment

& Onboarding

Considering planned EGSS expansion, Job profiles will need to be enhanced and specified toreflect responsibilities and hiring requirements of each position.

Demographic situation at EGSS is settled with no critical risks. Positive finding is a relatively highmobility of employees within the South Moravian region.

Remuneration system is internally fair and reflects local markets specifics, however salarybenchmarking reveals gaps in EGSS pay competitiveness vs. the market and also the target

bonuses should better reflect salary levels.

Performance management system provides a solid framework for feedback and reflects all majorperformance aspects (productivity, quality, skills, competencies and goals), however competencies

should more tailored to jobs.

Professional development opportunities are well set using the job rotation system, but additional

(soft/hard skills and people management) development should be treated systematically,addressing the stoppage of CS trainings.

Career model is actively used for HR management, however it needs to be adjusted to reflectEGSS current as well as future situation and needs. Also too broad salary ranges may not

represent a clear guideline for pay management.

Recruitment has been processed and delivered by S with no critical difficulties. Onboardingtrainings are of a high quality, however could be optimized in terms of time efficiency when EGSS

builds own capabilities.

Overview of internal analysis key findings:

StatusArea Descript ion



I. Introduction





i. Our Approach

ii. Covered Areas in Detail

iii. Regional Labour Market Development Trends - Summary


VII. Appendices

Table of Contents



* Official data and statistics for the South Moravian region include Brno which influences the overall picture about the region** First steps into the labour market, European Salary Survey, Put workforce planning to work, etc.

*** Brno excluded from remuneration statistics

External analysis provides holistic and independent view on various areas influencingregional labour market development around Hodonn, while taking into accountoutcomes of the internal analysis as key inputs and/or assumptions

External labour market analysis covers 10 areas:

Input sourcesOur approach

Labour market

& employment

Socioeconomic

environment and

demographics

Macroeconomic

prognosis

Each area contains:

Analysis of the area Key findings summarized in conclusions

including assumptions for the cost analysis

Status (evaluation of the area) Possible risks and threats to consider

A

B

C

J

F

External analysis

DE

G

H

I

Unemployment in the

SM region in detailMobility

Educational

structure

Remuneration

package

Admin employers

and employees in

the region

Planned

investments in the

region

Taxes and Grants &

incentives analysis

4

3

1

2

Internal analysis phase

results:

Inputs and assumption for the

salary cost developmentanalysis and modeling

Other data sources:

Deloittes surveys in the areaof workforce planning**,

Deloittes proprietary rewarddatabases and benchmarks***

Telephone and Email

enquiries:- data gathering from local

sources e.g. schools andlocal labour offices in theregion

Research of all publiclyavailable information:*

- standard data sources like

official institutes, relevantchambers or agencies (e.g.

Czech Statistical Office (S),Ministry of Labour and SocialAffairs, CzechInvest, etc.)



I. Introduction





i. Our Approach


A. Macroeconomic Prognosis

B. Socio-economic Environment and Demographics

C. Labour Market & Employment

D. Unemployment in SM Region in Detail

E. Mobility

F. Educational Structure

G. Remuneration Package

H. Admin Employers and Employees in the Region

I. Planned Investments in the RegionJ. Taxes and Grants & incentives Analysis



VII. Appendices

Table of Contents



Source: Ministry of Finance Survey of macroeconomic forecasts 4/2013, NB prognosis from May 2013, Deloitte

Rather pessimistic macroeconomic prognosis for the next 5 years might have on

contrary positive impact on EGSS workforce cost development

Macroeconomic PrognosisA

Status

Pessimistic

Selected macroeconomic indicators prognosis - RIndicator 2012 2013 2014 2015 2016 2017 2018

Inflation rate (y/y, %) 3,30% 1,70% 1,80% 1,90% 1,10% 2,00% 2,10%

Unemployment rate (LFS**, %) 7,00% 7,60% 7,70% 7,30% 6,70% 7,30% 7,60%GPD (real, y/y, %) -1,20% -0,50% 1,80% 2,10% 2,60% 2,30% 2,50%

Market salary increase (nominal, y/y, %) 2,80% 2,80% 2,70% 3,30% 3,00% 3,00% 3,00%

Analysis

Macroeconomic information South Moravian (SM) region:

Macroeconomic prognosis CR: Unemployment rate not too high when compared to the other EU countries, but the highest in R history

(7% in 2012)

Unemployment prognosis for 2013 and further is even higher regardless seasonal positive deviations Recession should continue recession as a new standard for companies Wages should grow slowly and labour demand should be low

Thanks to the negative macroeconomic prognosis, EGSS can expect reasonable nominal wages increases (on average 2,9% for

2014 -2018 period) and also good labour supply because of long-term high unemployment in the region.

Conclusion/Assumption

Political instability -new government tobe elected next year,

high probability of achange from the

right wing got left

wing (socialdemocrats)

Macroeconomic/fiscal instability in

the European union(EU) in general

Threats

*For overview of unemployment's rates in the other regions please seeAppendix 1 - Unemployment rate in the CR regional overview

GDP 2nd most productive economic region after Middle Bohemianregion, good GDP per capita

Unemployment rate in the SM region higherthan the CzechRepublic (CR) average SM region on 9th place with Zln region in 2012(14 regions in the CR )

Current unemployment rate: 8,58% (as at April 2013)* Long term high unemployment rates in the SM region, the highest in

districts of Znojmo (10,86%), Hodonn (10,99%) and Beclav (8,63%) In Brno-city unemployment rate of 7,63%, in Brno- rural area 6,28% in 2012 High number of unemployed people consists of educated job seekers at a young age and graduates

Selected macroeconomic indicators prognosis- R

**LFS (Labour Force Survey) method according to Eurostat requirements.



Demographic situation in the SM region is quite positive for EGSS mainly because of

favorable educational structure of the population and the suburbanization trend

Status

Fair

Analysis

Ageing of population is a European-wide trend which should not be neglected. However, high number of highly educated young

people and emerging trend of migration from cities back to rural places can play important positive role in the future. Attraction of

people in productive age back to their home towns shall be used in EGSSs advantage.


Ageing of population high proportion of65+ people to

children ratio (mainlyin Brno but also

Hodonn)

Outflow of people inproductive age

Threats

Socio-economic Environment and DemographicsB

South Moravian (SM) region basic info:

Population (2013): ca. 1 169 ths. inhabitants, out of whichca. 600 000 labour force

Size: 719 555 ha (~7 195 km2) Density of population: ca. 159 inhabitants/km2 Districts: 7 (Blansko, Brno-msto, Brno-venkov, Beclav, Hodonn,

Vykov, Znojmo), in Hodonn 156 ths. inhabitants Very convenient geographic position in the middle of Europe

(Bratislava, Vienna, Prague)

Brno is the capital of the region, after Prague the second most

important urban centre (population ca. 380 000 inhabitants)Around one third of people in the SM region live in Brno but because of emerging so calledsuburbanization trend (i.e. gradual and sustained shift of some residents from cities back to rural areaswith attractive natural environment) this share is shrinking

Favourable educational structure of the population (a high proportion of university graduates)A high proportion of scientific, technical, medical and teaching staff from the total number of employed

persons

Compared with other regions, high standard of living and quite high wage levels (influence of Brno) Unfavourable age structure of the population in the region - a high proportion of people aged 65 years

and more and at the same time low share of children*

The population losses are the highest in district Hodonn main drivers are aging of the existingpopulation, as well as outflow of people in productive age

*South Moravian Region is the third oldest region in the CR after Prague and Zlin region

Population density in SM region

Source: Internet


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*Source: Census of Population and Housing 2011 ** Source: Slovak Statistical Office, 2012*** Does not equal to the general unemployment rate calculated by dividing the number of unemployed to the total labor force

**** For number of employed based on a job type (not employer sector) see the section H

Population structure by economic activity is strongly influenced by the demographic

structure, in particular by the number of retired people

StatusAnalysis

Even though just 5% of employed people work in admin & support services and financial & insurance services, we still have a potential

base of ca. 28 ths. people which should have experience from admin support or finance services in the SM region. However, we

assume that they are mostly located in Brno district. Moreover, in Trnava region (SK), another 6,5 ths. people work in admin & supportservices.


People withexperience arebased in Brno and

do not want torelocate/commute to

Hodonn

Threats

Labour Market and EmploymentC

Inactive42%

Unemployed***

5%

Employed53%

Labour market by economic activity in SM:

Economically active: 58% out of which: 543 000 employed and66 000 unemployed (for a breakdown for Hodonin, see the next slide)

Economically inactive: the remaining 42% - dominated by retiredpeople. In lower age categories mainly students or people who care

for children and/or household

Hodonn and Brno districts are older - economically active populationis only about 50% here, which is below the SM average (58%)

In Trnava region (Slovakia), ca. 53% of economically active population(~ 298 000): 261 000 (88%) employed and 18 000 (12%)

unemployed**Source: S, 2012

Labour market by economic activity

(SM region)

Structure of employed by selected sectors:

In SM, employed people mostly work in 1)manufacturing industry, 2) wholesale and retail,

3) constructionAdmin & support services sector**** employs

15 000 people (2,7%), and financial &insurance services 13 000 people (2,4%)

In Trnava region (Slovakia) admin & supportsector has 6 500 employees (5,7% from

employed population) and showed year on yearincrease of 66% (2012/2011), but financial &

insurance services less than 1%

Structure of employed by selected sectors

(SM region, sector by company NACE)

Source: S, 2012

80

70

60

50

0Other

48.9%

Financial and

insurance

activities

2.4%

Admin and

support

2.7%

Construction

8.6%

Wholesale

and retail

11.4%

Manufacturing

26.0%

Total

Emloyed

543 ths.

90

Ths.

100

Sector

Fair


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Structure of unemployed people in Hodonn is very convenient for targeted profile of

Domestic payments for Slovakia and Austria, but ...

StatusAnalysis

- all unemployedpeople in preferredage range 20-45

- both men and women - with at least

secondary education

("matura") and

- at least basicknowledge of English

language

- we assume thatpeople in age rage 20-

45 have basic

knowledge of PC skillsneeded for EGSS

purposes

*Targeted profile

Structure of Unemployed in the SM Region in Detail (1/3)D

In the Hodonn district, there were more than 12 000 of unemployed people as at December 2012, which

makes around 50 people per one job vacancy (# of active vacancies based on MPSV/Labour offices) In our main targeted region**, there are more than 14 ths. unemployed people, out of which 1,212 met

requirements of EGSS targeted profile* defined based on Internal analysis results

Just in Hodonn town, we found 158 suitable candidates Considering even broader region (whole district of Hodonn, Beclav, Uhersk Hradit and Skalica), we

would found 1,917 suitable candidates

** Just towns in the closest distance from Hodonn with good travel connection, for exact list of towns seeAppendix 2 - Definition

of the closest targeted region

Source: Labour Office Hodonn, 4/2013; Ministry of Labour and Social

Affairs , S

Good

25,000

12,309

30,000

Beclav andUhersk

Hraditdistrcit

Region

14,476

Remaing

towns in

Hodonndisctrict plus

Skalica district

Total

29,014

# of unemployed

20,000

15,000

10,000

5,000

0

2,229

Just Hodonn

town

Nr. of unemployed as at

December 2012

705

2,000

1,500

# of unemployed

1,000

Remaining

towns inBeclav and

Uhersk

Hradit

Main targeted region

Total

(~Hodonn,Beclav,and

Uhersk

Hraditdisctricts

158

Only

Hodonntown

1,917

500

Towns in

range of 30-40 km of

Hodonn**

1,054

0

1,917from all

unemployed people

meeting targeted

requirements based on

age, education and

language

Nr. of targeted

unemployed by different

regions

1,212


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... for Hungary region and P levels of Securities & Treasury EGSS should consider

candidates from more distant areas ...

StatusAnalysis


For S&T positions we also looked at the candidates with active German language skills. Number of

candidates with at least passive English language skills and active German is much lower 112 in maintargeted region, 207 in broader region (see graph below)

*** Labour office does not tract data about previous experience

Source: Labour Office Hodonn,

4/2013; Ministry of Labour and

Social Affairs , S)Good

1,000

1,200

158

(13%)95

(1%)

98

(1%)

1,054

(8%)

Only Hodonn town

14

(1%)

Towns in range of 30-

40 km of Hodonn**

705

(5%)

0

# of unemployed

Remaining tows in Beclavand Uhersk Hradit

800

# of unemployed people with targeted profile A1* (at least

pasive English) vs. active German in addition

Main targeted region

- for A levels (at least30% intermediateGerman, 100%

intermediate English,basic admin

experience

- for P levels (inaddition requirement of

experience from

administrative/financial

work at least 2-3years***)

Special requirement

for S&T positions

Total EGSS deman d (targeted state in 5 yrs .) Market supply of unemploy ed workforce

just in Hodonn town: 158 candidateswith targeted profile out of which 14 with

additional German

In the area +/-30-40 km: 1,212candidates with targeted profile outof which 112 with additional German

in Hodonn, Beclav and UherskHradit and Skalica (SK) districts:1,917 candidates with targeted profile

out of which 207 with additional German

Domestic payments Treasury & Securities

Level/Teams DP SK DP HU DP AT DP CZ Treasury Securities

L3 3 8

P2 (~L2) 6 14P1 (~L1) 1 1 1 1 3 8

A3 1 21 52

A2 6 6 6 6 5 10

A1 17 14,5 21 34

SUM 24 21,5 28 42 38 92

at least pasive English + active German in addition

at least pasive English

20%, ie. 4 A+ 1 P should

speak fluent Hungarian


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... for example to attract Hungarian speaking candidates from Slovakia or experienced

S&T people from Brno region

Status


In the main targeted region (Hodonn ~ 30-40 km) there is currently a solid base of candidates with thedesired profile (1,212) out of which 112 candidates have in addition active German language

Considering EGSS future needs for workforce headcount, we assume that it is feasible to find suitablecandidates for nearshoring Domestic Payments of SK and AT within the closest Hodonn region

More difficulties can occur with 5 FTEs with Hungarian language and P levels for Securities & Treasury dueto required admin/finance experience where EGSS should consider more options.

For example:1) to nearshore Hungarian speaking candidates from Slovakia (e.g. from the Trnava district - 5% ofpopulation is Hungarian speaking and unemployment is 10%, 70 km from Hodonin). If moreHungarian speaking people are needed in the future, Dunajska Streda with 80% of population being

Hungarians and unemployment rate high (13%) might be a good source, but Dunajska Streda is too

far for daily commuting (150 km), so EGSS may need to provide some sort of accommodation supportto these people.

2) to find Hungarian speaking people in broader distance from Hodonn but within the SM region,

as, according to the last Census of Population and Housing in 2011, there are currently 351 peoplewith Hungarian nationality between 20-49 years, so there is a high chance to find 5 candidates even in

SM3) for P levels of Securities&Treasury, EGSS will need to motivate candidates with the required

profile and experience to travel (or relocate) from more distant places (mainly Brno).


number ofunemployedpeople will decline

rapidly

Candidates wil notpass the tests /

competencecriteria

it will be tooexpensive to find

experienced Plevels ofTreasury

& Securities

Threats

Good


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Status

Excellent

Population in the Hodonn district is used to commute to work, probably due to higher unemployment in the region. At the same time,

1,5% (~ 8 ths.) from employed people in the SM region commute to work more than 60 minutes . That is why we conclude that

people around Hodonn will be willing to commute to work.

Only the trainconnection toVienna (not

highway) cancomplicate long-term

training of experts

for Securities &Treasury in Vienna

(low risk, but

applicable mainly to

candidates withfamilies that cannot

relocate to Vienna

for 6 months)

Threats

Mobility (1/2)E

Mobility in general - overview:

SM region is connected to majority of centers by a good road and railway infrastructure (Praha, Bratislava,Ostrava, by train also Vienna)*

245 000 of people commute to work in the SM region (ca. 40% of labour force), out of which 62 000 toanother district and 12 000 to another region

In Hodonn district, 30 000 of people commute to work (19% of whole population), out of which 4 000 toanother district and 3 500 to another region

In Brno district, 83 000 of people (22% of whole population) commute to work, out of which 7 000 toanother district and 3 to another region - see also the graphs below:

Moreover, according to the last Census of Population and Housing (2011), in the SM region, more than2 000 people commute to work longer than 90 minutes and almost 8 000 commute to work 60-89 minutes

Source: Census of Population and Housing 2011

Mobility of the population in the SM region is supported by a good infrastructure. People

in Hodonn district are used to commute to work

Analysis

* For detailed map please seeAppendix 3 - Transport infrastructure

400

50

0

Ths.

Population

... commute to

work toanother region

3

(1%)

... commute to

work toanother district

7

(2%)

... commute

to work withinthe district

83

(22%)

Whole

population(ths.) out of

which those

who ...

370(100%) Brno

0

100

200

300

400

Ths.

... commute to

work to

another region

4

(2%)

... commute to

work to

another district

4

(3%)

... commute

to work within

the district

30

(19%)

Whole

population (ths.)

out of whichthose who ...

156

(100%)

Hodonn



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Status

Public travel connections within the Hodonn district are very favourable, no problem to reach Hodonn. Connections with Brno takemore than 1 hour, so if EGSS would like to nearshore experienced S&T people from Brno, there must be another motivation (e.g.

higher wage and/or benefits, such as pool cars for private purposes or a transportation allowance, potentially also housing&relocation

support) to motivate people to travel to Hodonn. The same applies to Hungarian-speaking people that may be best available fromSlovakia (Trnava or Dunajska Streda) where transportation connections is not good for Dunask Streda but feasible for Trnava.

High costs tomotivateexperienced people

from Brno regionand Hungarian

speaking people

from South Slovakiato travel/relocate to

Hodonn

Threats

Mobility (2/2)E

Transportation options to reach Hodonn:

Hodonn ~ 30-40 km: Transport infrastructure is very good there are regular buses and trainconnections to closest towns (see the table below)

Hodonn, Beclav, Uhersk Hradit: Transport infrastructure is good there are regular buses andtrain connections (minimum 1-2 buses and/or train per morning/afternoon)

Connection to Brno: There are bus and train connections, but it takes more than 1 hour to get toHodonn.

Connection to Slovakia (Trnava, Dunajsk Streda): Trnava can be reached by bus in ca.1,5 hours(one-way), but, as mentioned before, not such a high concentration of Hungarian speaking population

is available here (ca.2 0%~130 ths.). Dunajsk Streda has just 1 train connection (ca. 3 hours journey)

and no suitable bus connections

Source: Internet

Public travel connections within the Hodonn region are very favourable railway andalso a good road network with regular bus/train connections

Analysis

Mean of

transportRoute

# of connections-

morning (6:30-8:30)

# of connections-

afternoon (17:00-19:00)

Bus

Hodonn < 10 km 6-8 2-3

Hodonn < 20 km 5-6 2-3*

Hodonn < 30 km 2-3 2-3

TrainHodonn < 10 km 2-3 2-3

Hodonn < 20 km 2-4 1-2

Hodonn < 30 km 1-2 1-2

Bus + Train Hodonn < 40 km 2-4 3-5

* except Skalica/Senica with just 1 connection

Excellent


Ed ti l St t


21/69


Educational structure very favourable mainly thanks to Brno. Candidates for Domestic

Payment jobs can be chosen from secondary schools graduates. For S&T jobs, university

graduates may be attracted via internship offer with promise of future full-time job

Analysis

Very good educational structure with hundreds of secondary schools and universities graduates in the region. Great potential source forcandidates for EGSS. At the same time, based on selected telephone enquiries with selected schools, majority of grammar schools(Gymnasium) and also business colleges graduates continue to university studies. This can be because of high unemployment rate in theregion - they better continue studying as stay at home. Another opportunity for EGSS arises - how to attract secondary schools graduates tostay in the region and start attractive job (Domestic Payments positions) and motivate universities graduates to return to Hodonn (for S&T

jobs) eg. through cooperation with universities (offer intership and then full-time position)


No willingness and

motivation torelocate/stay/returnto Hodonn

Majority of studentswill choosecontinuation of

studies at the

university instead ofstart working

Threats

Educational StructureF

Unemployed gradutes:

At the same time, high numberof unemployed young graduates, just in Hodonn disctrict 253 ofunemployed graduates (secondary shool with maturaoruniversity graduates) in evidence of Labouroffice, out of which 236 has no previous working experience.

Secondary shools:

There are 13 secondary schools in Hodonn and another dozen in Beclav district. Each of themproduce on average 100 candidates with high probability to have basic English language skills.

For a list of secondary schools in district Hodonn and Beclav and their potential evaluation for EGSSplease see table in Appendix 4 - Secondary shools overview in Hodonn andBeclavdistrict.

Universities:

13 Universitties in whole SM region, majority of them base in Brno. For more information about main

universities (with economic specialization), approximate number of graduates and their language skillsplease seeAppendix 5 Universities overview in South Moravia

Excellent

Educational structure in SM region:

very favorable educational structure, university educatedpeople represent 10% of the population aged 15 and over

more than 80 thousand of university students (mainlyBrno), thousands of graduates each year

after Prague, the highest percentage of college and highschool educated population

education of employees in the region gradually increases enough of above-average number of qualified workforce

Educational structu re in SM region

Status

R ti P kG


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EGSS base and total salaries are below the market EGSS will have to carefully balancethe compensation costs with the risk of attrition increase due to poor pay conditions

Status

Fair

Analysis

The benchmarking of EGSS salaries against the peer market (see the document Internal analysis)revealed that avg. EGSS total cash salaries at all job levels are below the market median, specifically:

~20% below the market at the BOF1 level ~10% below the market at the BOF2 level ~40% below the market for team leaders (BOF4 level), or 20-28% below when comparing to BOF3 When looking at the Czech vs. Slovak market comparison, Czech salaries are generally higher in all

comparable sectors and regions at the base pay and benefits levels. Slovakia catches up CZ slightly at the

total cash level due to higher bonuses paid there see Appendix 8 for more detail. The typical remuneration package in the South Moravian region can be described as follows (in CZK,

gross monthly figures, based on market data in the SM region for FSI, Admin and Share Service Centres):

In the next five years horizon, we assume EGSS salary increases to be slightly above the market movement in order to bring

salaries closer to market levels and to avoid undesired increase in attrition rates. As a base for the new salary structure and ranges(draft of the new compensation management guidelines including entry level salaries - see the draft of the new Career model for details),

we took a combination of the most relevant markets (SM region FSI and SM region admin jobs) while still reflecting lower

positioning of EGSS comparing to the market median due to specifics of Hodonn region ( high long-term unemployement and lower

living standards compared to other CZ regions)


Increase in EGSS

attrition due to lowersalaries comparingto the market

Pressures on EGSSpersonal costsincrease

Outflow of peoplefrom the region to

higher paid regions,e.g. Brno (especially

at P level)

Threats

Remuneration PackageG

25,300

29,250

P1/TL1A1

3,000

31,000

4,825

19,300

27,125

6,200

3,000

5,250

21,000

5,000

A3

5,000

5,060

35,360

24,250

4,2503,000

17,000

45,000

A2

15,000

30,000

5,000

P2/TL2

42,200

35,000

40,000

10,000

20,000

25,000

0

Benefits

Base salary

Bonus

Benefits provided on the market

(value/year, % of prevalence for admin): Meal vouchers (CZK 10 700 employer

part, i.e. CZK 42 / day, 72%)

Extra vacation days (5 days, 96%) Pension contribution (CZK 6 000, 67%) Capital life insurance contribution (CZK 5

000, 25%)

Risk life insurance (~annual salary incase of death, 25%)

Special medical care (CZK 2 500, 55%) Transportation allowance (22%)

Typical remuneration

package on the market

Ad i E l d E l i th R iH


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23 2013 Deloitte Czech Republic* Ministry of Labour and Social Affairs statistics for Czech Republic and Slovak Statistical Office

No major employers from administration sector in Hodonn area. Big companies from

admin/back office/customer support just around Brno

StatusAnalysis

not enough peoplewith relevantexperiences for S&T

positions in Hodonndistrict

headhunting of S&Tspecialist from Brnotoo expensive

Threats

Admin Employers and Employees in the RegionH

Poor

Major employers within Hodonn district:

the biggest companies (500+ employees) are from:- road freight transport (SAD Hodonn),- food processing industry (The Candy Plus Sweet Factory,Jednota, spotebndrustvo) and- manufacturing industry (Jihomoravsk armaturka)

middle companies (200-400 employees) mainly from:- manufacturing industry (Lignit Hodonn, Okna Macek,

MND Drilling & Services,T Machinery, roubrna Kyjov) bigger companies mainly based in Hodonn town for full list of companies over 100 employees see Appendix 9

- Overview of major employers in Hodonn district

No big admin/back office/customer support employers in the Hodonn district or Skalica/Senica district (SK).We assume that for S&T positions which required experience from administration (preferable finance), EGSS might have problems to find

these specialist in close Hodonn district and should consider looking at further market (Brno).

Admin/back office/customer support employers in SM region:

Most relevant players for EGSS: Motorola Solutions CZ (customer support, foreign languages), PPGIndustries Czech Republic s.r.o (SSC accountin services), Infosys BPO s.r.o. (customer support)

almost all based in Brno with one exceptioncall centre AMAX which has also branch in Hodonn(less than 100 employees)

for overview of all companies from admin/back office/customer support seeAppendix 10 - Overview ofadmin/back office/customer support companies in SM region


Number of admin employees based on a job type:*

Czech republic: 305 000, South Moravia: 22 000

Trnava region (SK): 9 126, Skalica & Senica districts: 1 744

19

9

555

12

3

0

4

1

0

5

10

15

20

250 - 499500 - 999 50 - 99

Nr. of employees

Nr. of companies

200 - 249 100 - 199

Hodonn

Other towns in Hodonn district

Number of major employers inHodonn vs. rest of the district

Source: Internet

Major employers in Skalica district e.g. INA Skalica, Eissmann Hol, Protherm Skalica, Grafobal - do notinclude admin employers as well. Employement situation in Senica is worst than in Skalica less bigemployers, higher unemployement rate (major employers: OMS Doj, 101 Drogrie, Delphi .

Pl d I t t i th R iI


24/69


Investment conditions in South Moravian region are in general very good mainly because of:

qualified educated workforce good infrastructure supported by a quite high mobility of population strategic geographic position good connections to major centres (Prague, Bratislava, Vienna) science & research, Brno considered as Silicon Valley of Czech Republic great potential source of

workforce mainly from IT industry (due to high number of University students)

For overview of planned investments in the region see the table below close to Hodonn just oneplanned investment call centre of BEI Multidemia Interactive in old tobacco plant

Based on telephone enquiries of Munipical Office in Hodonn - not planned investments for next years areconfirmed yet but Hodonn town is open to inflow of investors, many unused brownfields in Hodonndistrict (seeAppendix 7 - Overview of brownfields in Hodonn district)

Even though, there are no certain planned investment in close Hodonn except one call

centre, a risk of new investors entrance is valid

Planned Investments in the RegionI

Analysis

SM region has very good conditions for investments in general, but no investment planned in Hodonn district in near future except

one call centre which could be potential competitor of EGSS (similar profile and wages ranges 13-25 000 CZK) but it still did notopen despite of previous press announcements.


entry of new investorin Hodonn disctrict

Threats

Status

Good

OrganizationNumber of

emloyeesSector When? Town Investition

Gardner Denvercca 100 by the end

of 2013

European shared

services centreEnd of 2013 Brno

0.8 million EUR + additional

0.3 million EUR on

recruitment of new employees

and training

Baumer20-30 software and

testing engineers

new research and

development centreMarch 2013 Brno

CEITEC - Central European

Institute of Technology200

new centre of

excellenceEnd of 2014 Brno 300 million EUR

BEI Multimedia Interactive400 (200 by the end

of 2013)Call Centre

Planned from April2013 but postponed

to June 2013 (?)

Hodonn

Source: Internet

* Brownfields are abandoned or underused industrial and commercial facilities available for re-use through revitalization

Overview of planned investments in SM region

Ta es and Grants & Incenti es Anal sis (1/2)J


25/69


The Czech tax environment will likely change in the next years, but mainly for employees.

Employers may benefit from lower social security contributions

Information on the Taxand Social security

rates in 2013:

Maximum assessment base for social security (cap) is CZK 1 242 432 per year Maximum assessment base for health insurance was eliminated with effect from 1 January 2013 Corporate tax is 19%

Tax environment changes planned for 2013-2015: Changes relating to parts of insurance contributions paid by employers Social security and health insurance contributions paid by employers will be replaced by the aggregate

payroll tax in the amount of 32.4% (instead of 34%) to be implemented as of 2014 or 2015 The employee health insurance rate will increase from z 4.5% to 6.5% Gross salary as the income tax base (instead of super-gross salary) with a tax rate of 19% A cap of CZK 10 000 p.a. for wealth benefits (recreation, health, culture, sport, training / Flexi passes) to

be exempt from tax and SS&H insurance on employee side (for employer always non tax-deductible cost)

Tax environment outlook for 2015-2018 (mostly relevant to employees only):

Likely introduction of a progressive tax rate due to next election (June 2014, social democrats will win) Support for taxpayers with average and low income and families with children is expected (likely to be

reflected in social allowances rather than in tax reliefs)

Possible changes in employee benefits as a result of trade union lobbying (tax relief of meal vouchers isstill a hot topic the government wants to cease it, public and Unions have been strong in resistance.However, future of meal vouchers tax advantages is uncertain and dependent on political development).

Status

Good

Most forecasted changes will apply to employees only. The most relevant (and positive) change for employers is the planned decreasein SSH insurance rates from 34% to 32,4%. However, the effective date is not known yet, therefore we reflected this change in the

various scenarios of the workforce cost modelling (will be effective from 2014 / 2015 /will not become effective at all).

Conclusion / Assumption

Unpredictability ofthe tax environment

due to election in2014 currentgovernment getsweaker in enforcing

planned changes,

new government willlikely be socialistic

The decrease inemployers social

security cost may beoffset by lower limitsfor benefits tax-

deductibility (e.g.,meal vouchers)

Threats

Taxes and Grants & Incentives Analysis (1/2)J

Analysis of Tax environment

Employee Employer

Health insurance 4,5% 9%Social insurance (sickness, retirement, unemployment) 6,5% 25%

Sub-total (social security & health insurance) 11% 34%

Tax (applied on the super-gross salary*) 15%** -

* Super-gross salary is thegross income of an employee

increased by the compulsory

insurance contributions paid by

the employer

For example of potential implications, see

Appendix 6 Comparison of Income Tax

Payments in 2013 vs. 2015

* SSH Social Security & Health Insurance

**A solidarity surcharge of 7% is applied on income increasing CZK 103,000 per mon



26/69


There are three main categories for possible incentives

Status

There are opportunities for EGSS to get financial support for its growth. Eligibility of EGSS to the investment incentive related to shared

service centers must be further examined as core banking activities may be excluded. New programs (cash grants) may be announced

at the end of this year. In the meantime, EGSS can benefit from employment of disabled people through increased tax relief limits.

Conclusion / Assumption

EGSS will not qualifyfor the Investment

Incentives(pessimisticscenario)

A fine is applied bythe Tax Authorities ifthe requirement on

disabled people

employment is notmet

Threats


Analysis of possible Grants & incentives

Good

*For detai led analysis of pos sible Grants &

incent ives 1) and 2) and their relevance to EGSS

please see the embedded Pow erPoint deck:

Applicability

to EGSS

Type of incentive

1) Investment Incentivesshared service centres

2) Cash grants

3) Company Income Tax (CIT)

relief due to employment ofdisabled people

Eligibility andopportunity

Applicable to SSC and activities (jobs)

related to internal process, not to a commonactivity of a bank and client related work

(i.e., not sure if EGSS will qualify).Potential grant up to EUR 1 845 984*

Currently no open grant program relevant

for EGSS, but new programs are being

prepared - detailed rules &conditions areexpected to be published at the end of 2013

Possible CIT relief of 18 000 CZK/disabled

employee (minor and moderate disability)

or 60 000 CZK (major disability).Employment of min 4% of disabled people

compulsory for all employers with more

than 25 employees.


27/69


I. Introduction





i. Our Approach




VII. Appendices

Table of Contents


28/69


Pessimistic prognosis for the main macroeconomic indicators andprobable change in politics (social democrats likely to win elections in 2014)

might have on contrary positive impact on EGSS cost development.

Macroeconomic

Prognosis

Area Trends & future developments

Admin Employers and

Employees in the

Region

Labour Market &

Employment

Mobility

Educational Structure

Remuneration

Package

SocioeconomicEnvironment and

Demographics

Taxes and Grants &

Incentives Analysis

There is a high number of highly educated young people in the SM region andemerging trend of migration from cities back to rural places can play important

positive role in the future. However, SM region is the 3rd oldest region in CZ.

Long term high unemployment rate in Hodonn region might ensure stablesource of workforce mainly for Domestic Payments positions.

Both willingness of people to commute to work and transport infrastructure inthe region is very good and there are no indicators it should change in the

future

Unemployment in the

SM Region in Detail

Planned Investments

in the Region

Regional Labour Market Development Trends Summary

Status

Aging of population could have negative influences on labour market in the future.In particular, Hodonn and Brno districts are older - economically activepopulation is only about 50% here, which is below the SM average (58%)

Future opportunities for EGSS consists of 1) attracting secondary schoolsgraduates to stay in the region and 2) motivate universities graduates to return

to Hodonn (for S&T jobs) e.g. through cooperation with universities

EGSS base and total salaries are below the market which may increase a riskof workforce attrition increase due to poor pay conditions

No major employer acts in the administration sector in the Hodonn area. Bigcompanies from admin/back office/customer support are around Brno which

can overprice nearshoring of potential experience S&T candidates

SM region has very good conditions for investments in general, but no concreteinvestment is planned in Hodonn district in the near future except one callcentre which may drain some admin workforce off the labor market.

The most relevant (and positive) change for employers is the planned decreasein social security & health insurance rates from 34% to 32,4% (should be

effective from 2014 or 2015, still pending government approval)


29/69


I. Introduction






i. Approach

ii. Assumptions & Inputs

iii. EGSS Cost Development Scenarios

VII. Appendices

Table of Contents

Workforce cost analysis approach


30/69


The workforce cost analysis is based on the Erste group near-shoring feasibility studiesand Deloittes recommendations for implementation, reflecting various developmentand recruiting scenarios

EGSS expansion scope

Scope based on Erste Groupnearshoring feasibility studies (SSCpayments, Securities & Treasury

nearshoring feasibility study)

Five years horizon of development(2013-2018)

Recommendations in the context of EGSS

expansion (used as inputs - need to be

validated)

Organization structure High level career model & salary ranges Staffing plan & targeted career structure per

teams

3 scenarios of external environment

development (with impacts on EGSS

environment)

Positive scenario (optimistic) Realistic scenario (most likely) Negative scenario (pessimistic)

Scope of analysis

Structure of the workforce costs analysis

Workforce Costs Model structurePreconditions

Remuneration costs (including related taxes) Base salary Bonuses Benefits

Fluctuation costs & Onboarding costs (mentoring new hires at EGSS)Additional costs to attract the required workforce from more distant areas

1) Current EGSS teams

International payments holding, International payments CS,Foreign cheques, Investigation holing, Domestic payment CS

2) To be nearshored teams

Domestic payments

Securities&Treasury

SlovakiaAustria Hungary

Recruiting scenario A

(hiring all in Hodonin)

Recruiting scenario B(need to attract people

from Slovakia/Trnava)

Recruiting scenario A

(hiring at 1 below the targeted career level,

allowing to be fully operational in 2017 , butneed to attract ca. 20% candidates from Brno)

Recruiting scenario B

(hiring low at A1 or A3 levels, mostly in

Hodonin, but allowing to be fully operationalonly in 2019)

Workforce cost analysis approach


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I. Introduction






i. Approach



VII. Appendices

Table of Contents

Organization structure


32/69

32 2013 Deloitte Czech Republic*Recommended for the expanded EGSS organization including S&T, outsourcing not considered.

EGSS executive management

Domestic payments

Group

1 FTE

Treasury Group

1 FTE

Securities Group

1 FTE

Holding &

International Group

1 FTE

DP CS Team

42 FTE

DP SK Team

22,7 FTE

DP HU Team21,5 FTE

DP AT Team28,3 FTE

Investigation Hld.

Team

7 FTE

ForeignChequesTeam

6 FTE

International P. CSTeam

12,8 FTE

International P.Hld. Team

12,5 FTE

553 Team20,2 FTE

551 Team

8 FTE

569 Team

16,2 FTE

552 Team

9,6 FTE

554 Team

13,7 FTE

555 Team

17,9 FTE

564 Team6,5 FTE

557 Team6,3 FTE

559 Team

14,3 FTE

857 Team

15,4 FTE

4 TL; 36,5 FTE4 TL; 114,5 FTE 7 TL; 92,2 FTE 3 TL; 38,5 FTE

IT Support; 1 FTE*

HR; 1 FTE*

Admin support; 3 FTE

285 FTE

Recommended span of control of managers and

leaders in SSC: 715 FTEs, depending on theirrole and level of standardization of teamsactivities. Therefore, DP teams can have higher

span of control (simple processes), while

Sec&Try TLs should be supported by deputies. Group leaders are recommended as a new

management level in the new expanded EGSS

Each team contains 1 FTE of a team leader andTL deputies / desk leaders, if necessary

Group leaders competencies: Group processes supervisor (continuously

looks for enhancements in processes)

People manager (ensuring that humanresources are effectively allocated, managing

current & future people development and

staffing plan with respect to fluctuation andtargeted organization structure)

Operational / Managerial ratio: 0:100 Team leaders competencies:

Accountable for ensuring that all transactionswithin assigned process are carried out in

timely and efficient manner (quality,

productivity). People management (reporting, development,mentoring, performance mgmt., etc.)

Operational / Managerial ratio: 50:50(currently 40:60)

Pros Optimal span of control with effective

processes and specialization of business units

Enhancement in human resourcesmanagement

Cons Higher personal expenses on Group leaders

Scope of the workforce cost analysis and modeling

Organizational structure

valid also when

excluding Securities &Treasury (130 FTE)

Targeted structure

after implementation

of all nearshoringwaves

Description

Organizational structure in the context of EGSS expansion should be extended byGroup leaders in order to keep the span of control reasonable

Organization structure

Career model draft recommendation by Deloitte


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Min Mid Max

Admin

A1 14 16 18

A2 15,5 18 20,5

A3 17,5 20,5 24

Professional

P1 20,5 24 28

P2 24 28 33

Team Leader

TL1 20,5 24 28

TL2 24 28 33

TL3 28 33 39

Group

Leader

GL1 33 39 46

GL2 39 46 54

24 21,5 28 42 13 12 6 7 38 92

1 1

1 1 1 3

1 3 8 12

1 1 1 1 6 14 24

1 1 1 1 1 1 1 1 3 8 19

1 3 3 1 4 21 52 85

6 6 6 6 8 7,5 3 5 10 57,5

17 14,5 21 34 86,5

Sum

GL2

GL1

L3

TL2 / P2

TL1 / P1

A3

A2

A1

Level

Base salary rangeLevelRole

Thousands CZK

Salary ranges should be reviewed annually (notnecessarily increased, but checked to reflect the market)

Career levels have been adjusted to link with the ErsteGroup structure

Salary ranges for lower team leaders are at the samelevel as professionals in order to allow various career

paths for senior professionals with key know-how aswell as the traditional managerial path.

Salary ranges (monthly gross base salaries) Career growth and targeted structure (2018)

Organization focused on internal development andcareer growth (hire low & grow, replace internally and hire at lowest entry level again)

General EGSS entry level is A1 (relevant for Domestic payments) System of jumpers on Admin and Professional levels remains (knowledge of processes) Management of an employee's career should reflect his potential and ambitions and also team

assignment (current and desired team, even at the same career level lateral moves)

FTEs 14

1

2

1

7

2

Example of

an average

S&T teams

careerstructure

Considering workforce demographics in the SM region, career model should be focusedon internal development and career growth

Career model draft recommendation by Deloitte

Development scenarios


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34 2013 Deloitte Czech Republic* Unemployment rate (Czech republic, method LFS, age 15-64, %)

2013 2014 2015 2016 2017 2018 Inflation rate (y/y) 1,7% 1,5% 1,5% 0,8% 1,7% 1,7% 1,5%Unemployment rate* 7,6% 8,2% 8,3% 8,7% 9,0% 9,0% 8,5%

GDP (real, y/y) -0,5% 1,5% 1,8% 2,4% 2,1% 2,2% 1,6%

Market salary increase (nom., y/y) 2,8% 1,8% 2,0% 1,5% 2,2% 2,3% 2,1%EGSS fluctuation 5% 5% 5% 5% 5% 5% 5,0%

EGSS salary increase (nom., y/y) 4,9% 1,5% 1,0% 1,2% 1,7% 1,7% 2,0%

Employer SSHI (%) 34% 32,4% 32,4% 32,4% 32,4% 32,4%

Scenarios

(in relation to EGSS)

Positive

1

Most

likely

2

Negative

3

Statistics Description

Negative macroeconomic prognosis with

low GDP growth and highunemployment

No new employers / investments in theregion

Low fluctuation of EGSS employees Tax reform effective from 2014

(favorable to employer)

Low EGSS salary increases

2013 2014 2015 2016 2017 2018

Inflation rate (y/y) 1,7% 1,8% 1,9% 1,1% 2,0% 2,1% 1,8%Unemployment rate* 7,6% 7,7% 7,3% 6,7% 7,3% 7,6% 7,4%GDP (real, y/y) -0,5% 1,8% 2,1% 2,6% 2,3% 2,5% 1,8%



Employer SSHI (%) 34% 34% 32,4% 32,4% 32,4% 32,4%

Most likely macroeconomic prognosis

with moderate GDP growth and stableunemployment rate

Tax reform effective from 2015(favorable to employers)

Expected moderate fluctuation of EGSSemployees

Moderate EGSS salary increases

2013 2014 2015 2016 2017 2018

Inflation rate (y/y) 1,7% 2,1% 2,3% 2,0% 3,8% 4,0% 2,7%

Unemployment rate* 7,6% 7,3% 6,6% 5,7% 5,9% 5,6% 6,5%GDP (real, y/y) -0,5% 2,0% 2,5% 3,0% 3,0% 3,0% 2,2%



Employer SSHI (%) 34% 34% 34% 34% 34% 34%

Positive macroeconomic prognosis withhigher GDP growth and descending

unemployment Appearance of new employers and

investments in region (competitors on

the labor market)

Higher fluctuation of EGSS employees Pressure on salary increases Tax reform not passed and implemented Higher EGSS salary increases

Sources: Statistics and forecasts by official institutions or Deloitte

assumption (for detailed sources per indicator, see the Excel model)

The cost analysis model reflects three scenarios of macroeconomic development withimpact on EGSS workforce management indicators

Development scenarios

Assumptions


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Category Assumption

Staffing The staffing plan was calculated based on the Erste Group feasibility studies and reflects the suggested EGSS org. structure and career model. Career development in all teams is reflected in the staffing model with the aim to reach the targeted career structure by 2018 at latest. FTEs count was rounded on full time or half-time. Potential decrease of EGSS headcount (due to efficiency enhancement and decline in paper based transactions) has not been considered. Average yearly costs per FTE are calculated based on average headcount of the respective year. EGSS executive management (2 FTE) and admin support (3 FTE) not included in the cost analysis.

Remuneration Remuneration costs are linked to the development scenarios (mainly annual salary increases and fluctuation costs). The remuneration costs are based on the current average salaries, on our assumption of average salary for the currently unpopulated career

levels and on the new salary structure for new hires entry salaries (minimum of the respective salary range is applied to new hires till theirpromotion; after promotion, average salary for the respective career level is applied).

Salaries of all EGSS employees (based on a staffing plan for the respective period) are reviewed once per year(in January). Promotions are linked to calendar year (valid from January). After promotion, remuneration is based on average salary at the new career level.

Bonuses are considered as target bonuses under the current system (i.e. maximum value of CZ 3 800 / month). Alternative of bonusesexpressed as % of base salary can be changed in the model parameters (Admin & Professionals 25%, Team leader and Group leaders 20%). Benefits are considered as yearly average benefits value received by an employee. Sick days and 5 extra vacation days not included.

Fluctuation Fluctuation costs calculated as productivity loss of a new hire and mentoring cost related to a new hire (parameters are team specific): Productivity loss: % of entry salaries for a given period (team specific, e.g. 50% of 3 months at domestic payments)). Mentoring costs: Average salary of an internal mentor (team specific level) for on-boarding period (team specific) for part of time (%).

The following items not reflected in the model: Savings related to lower entry salaries comparing to salaries being replaced; Salary savings dueto vacancy time (considered to be covered by jumpers or overtime); Other recruitment costs (advertisements, assessments, etc.).

On-boarding Reflecting only internal mentoring costs for new hires (based on recruitment waves). External training (outside of EGSS, e.g. in domesticcountries) neglected.

On-boarding costs calculated as a productivity loss of a new hire and internal mentoring cost same logic as fluctuation costs, see above Productivity loss: same logic as fluctuation costs, see above Mentoring costs: Average salary of an internal mentor (team specific level) for on-boarding period (team specific) for part of time (%).For each recruitment wave, we count 1 mentor per 10 new hires.

Domesticpayments

Hungary

In case of hiring Hungarian speakers from the Trnava region, a Transportation allowance is added to the overall remuneration costs, reflectingtravel expense costs to support willingness to travel to Hodonin.

Accommodation support/allowance not included.

Securities &

Treasury

In case of hiring experienced workforce from Brno, a Market premium is added to the overall remuneration costs. Market premium reflects:Salaries differential (in Brno), relocation allowance (willingness to travel or to relocate), travel expenses. Accommodation support not included.

Assumptions used for the workforce cost calculation model are parameterized and canbe further modified based on discussion with you

Assumptions


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I. Introduction






i. Approach



VII. Appendices

Table of Contents

Teams: All teams, excluding Securities & Treasury


37/69


Staffing plan is the key input into the EGSS workforce cost calculations

Domestic payments Hungary

Specific Requirements: 5 advanced Hungarian speakers(4 operators, 1 TL)

Scenarios: High pro babi l i ty :Hiring from Hodonn (or South Moravian)

region with no additional costs.

Low pro babi l i ty :Impossible to hire in Hodonn region;Hiring from Trnava region with additional premium costs

(transportation allowance) of 136 EUR / employee / month.

For the total costs of this transportation premium seeAttraction premiums on the following slide.

Teams: International payments holding, International payments CS, Foreign cheques, Investigation holding, Domestic Payments CS,Domestic Payments HU, Domestic Payments SK, Domestic Payments AT

Team

International

payments

holding

International

payments CS

Foreign

cheques

Investigation

holding

Domestic

Payments CS

Domestic

Payments HU

Domestic

Payments SK

Domestic

Payments AT

Status /

LevelAs-Is To-Be As-Is To-Be As-Is To-Be As-Is To-Be As-Is To-Be Hire

Grow

toHire

Grow

toHire

Grow

to

A1 2 7 2 2 2 41 34 20,5 14,5 23 17 27 21

A2 3,5 7,5 5 8 2 4 2 2 6 6 6 6

A3 7 3 1 3 2 1 2 2 1 1 1 1 1P1 1 1

P2

TL1 1 1 1 1

TL2 1 1 1

TL3

sum 12,5 12,5 13 13 6 6 6 6 42 42 21,5 21,5 24 24 28 28

GL1 1 1

GL2

Development potential of the current workforce (in the current teams)is favorable to achieve the targeted career structure (employees want to

grow, while external job opportunities are limited).

Availability of the required workforce for the to-be nearshored teams:

Low risk of unavailability of the required workforce for Domestic

payments SK and Domestic payments AT Moderate risk of unavailability of required workforce for Domestic

payments Hungary due to requirements on Hungarianspeaking FTEs

Current EGSS teams Team to be nearshored to EGSS

Group Leaders

included in the

calculation.

Staffing plan

Description

The targeted

staffing at career

levels (To-Be orGrow to by 2018) is

based on a

Deloittesassumption and is

reflected in the cost

calculation model.




38/69


Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTEBase pay 741 212 7 249 1 083 028 7 594 1 219 733 7 869 1 243 333 8 022 1 264 470 8 158 1 285 966 8 297

Bonuses 146 604 1 434 250 309 1 755 285 567 1 842 285 645 1 843 285 757 1 844 285 871 1 844

Super gross 1 189 674 11 635 1 786 672 12 527 1 993 017 12 858 2 024 368 13 060 2 052 500 13 242 2 081 112 13 427

Benefits 131 140 1 283 184 729 1 295 214 493 1 384 231 453 1 493 231 453 1 493 231 453 1 493

Total Remuneration 1 320 814 12 917 1 971 401 13 822 2 207 511 14 242 2 255 821 14 554 2 283 953 14 735 2 312 565 14 920

On-boarding 78 406 767 29 113 204 0 0 0 0 0 0 0 0

Fluctuation costs 3 797 37 5 216 37 5 641 36 5 705 37 5 796 37 5 890 38

Total EGSS costs 1 403 017 13 721 2 005 730 14 063 2 213 152 14 278 2 261 526 14 590 2 289 750 14 773 2 318 454 14 958Attraction premiums (DP HU) 0 0 10 934 77 10 934 71 10 934 71 10 934 71 10 934 71

Grand total EGSS costs 1 403 017 13 721 2 016 664 14 140 2 224 086 14 349 2 272 460 14 661 2 300 684 14 843 2 329 389 15 028

Positive

Most

likely

Negative

Scenarios

1

2

3

Workforce costs development (EUR)*

Year 2013 2014 2015 2016 2017 2018

Costs structureYearlycosts

Yearlycosts/FTE

Yearlycosts

Yearlycosts/FTE

Yearlycosts

Yearlycosts/FTE

Yearlycosts

Yearlycosts/FTE

Yearlycosts

Yearlycosts/FTE

Yearlycosts

Yearlycosts/FTE

Base pay 741 212 7 249 1 098 332 7 701 1 268 396 8 183 1 322 323 8 531 1 368 604 8 830 1 416 505 9 139

Bonuses 146 604 1 434 250 406 1 756 285 826 1 844 286 063 1 846 286 308 1 847 286 561 1 849

Super gross 1 189 674 11 635 1 807 310 12 672 2 082 658 13 437 2 129 503 13 739 2 191 103 14 136 2 254 860 14 547

Benefits 131 140 1 283 184 729 1 295 214 493 1 384 231 453 1 493 231 453 1 493 231 453 1 493

Total Remuneration 1 320 814 12 917 1 992 039 13 967 2 297 151 14 820 2 360 956 15 232 2 422 556 15 629 2 486 313 16 041On-boarding 78 406 767 29 530 207 0 0 0 0 0 0 0 0


Total EGSS costs 1 403 776 13 729 2 027 916 14 219 2 305 445 14 874 2 369 422 15 287 2 432 552 15 694 2 496 641 16 107

Attraction premiums (DP HU) 0 0 10 934 77 10 934 71 10 934 71 10 934 71 10 934 71Grand total EGSS costs 1 403 776 13 729 2 038 850 14 295 2 316 380 14 944 2 380 356 15 357 2 443 487 15 764 2 507 575 16 178

Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Base pay 741 212 7 249 1 108 535 7 772 1 295 559 8 358 1 366 301 8 815 1 434 616 9 256 1 509 216 9 737

Bonuses 146 604 1 434 250 471 1 756 285 971 1 845 286 295 1 847 286 657 1 849 287 051 1 852

Super gross 1 189 674 11 635 1 821 068 12 768 2 119 251 13 673 2 214 479 14 287 2 306 505 14 881 2 406 997 15 529

Benefits 131 140 1 283 184 729 1 295 214 493 1 384 231 453 1 493 231 453 1 493 231 453 1 493

Total Remuneration 1 320 814 12 917 2 005 797 14 063 2 333 744 15 056 2 445 932 15 780 2 537 958 16 374 2 638 451 17 022On-boarding 78 406 767 29 809 209 0 0 0 0 0 0 0 0


Total EGSS costs 1 404 535 13 736 2 045 213 14 340 2 345 832 15 134 2 459 820 15 870 2 553 828 16 476 2 656 493 17 139

Attraction premiums (DP HU) 0 0 10 934 77 10 934 71 10 934 71 10 934 71 10 934 71

Grand total EGSS costs 1 404 535 13 736 2 056 147 14 416 2 356 767 15 205 2 470 755 15 940 2 564 762 16 547 2 667 427 17 209* For detailed WF costs development by teams see Appendices WF cost development per teams

EGSS workforce costs development (based on the staffing plan on previous slide)

, g y

Teams: International payments holding, International payments CS, Foreign cheques, Investigation holding, Domestic Payments CS,Domestic Payments HU, Domestic Payments SK, Domestic Payments AT

Teams: Securities & Treasury (1/3)


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Team Treasury Securities

Status /

LevelHire

Grow

toHire

Grow

to

A1 5 10

A2 21 5 52 10

A3 3 21 8 52P1 6 3 14 8

P2 6 14

TL1

TL2 3 8

TL3 3 8

sum 38 92

GL1 1

GL2 1

Securities & Treasury require a professional experience and bothGerman and English language skills to reach the targeted structure

Limited availability of the required workforce in the Hodonn region

Favorable availability of the required workforce in Brno

Hiring from Brno would require additional premium costs(transportation allowance + market premium) of 336 EUR / month /

employee

Scenarios:

Scenario A: Professionals need to be attracted from Brno Scenario B: Hiring of junior staff in Hodonin and their long-term

development

Group Leaders included in the calculation.

Staffing plan

Description Scenario A: Attraction of Professionals from Brno

Scenario B: Long-term junior staff development

Hiring junior workforce with no financial back office experience (A1and A3 level) mostly available from Hodonn region and their gradual

development to the target level

Employees to be hired from Brno: 5% (mostly A3, P1) Requires internal hiring from different teams (mostly to A2 positions) Reaching the target career structure: 2019 (fully operational)

Pros:

Lower costs on premiums paid to employees from Brno Development of local employees from Hodonn with lower risk of

future fluctuation

Cons:

High on-boarding and development costs (long-term productivity lossand mentoring costs)

Time to fully onboard and became fully operational

Hiring the workforce at one level below the targeted structure (mostly

at professional level) Employees to be hired from Brno: 20% (mostly A3, P1) Require partly internal hiring from different teams (mainly to

Professional levels)

Reaching the targeted career structure: 2017 (fully operational)

Pros:

Shorter time to fully onboard and become fully operationalCons:

Higher risk of fluctuation Additional costs on premiums paid to employees from Brno

Team Treasury Securities

Status /

LevelHire

Grow

toHire

Grow

to

A1 36 68,5

A2 5 16,5 10

A3 2 21 5 52P1 3 2 8

P2 6 14

TL1

TL2

TL3 3 8

sum 38 92

GL1 1

GL2 1

Scenario A Scenario B

Staffing plan is the key input into the EGSS workforce cost calculations

y ( )



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EGSS workforce costs development (based on the respective staffing plan)

Scenario A

Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Base pay 0 0 293 719 8 332 965 966 8 511 1 251 904 9 484 1 396 242 10 578 1 419 978 10 757

Bonuses 0 0 36 480 1 035 187 434 1 651 241 783 1 832 244 413 1 852 244 537 1 853

Super gross 0 0 442 467 12 552 1 527 101 13 455 1 977 642 14 982 2 172 227 16 456 2 203 818 16 696

Benefits 0 0 45 656 1 295 157 064 1 384 197 108 1 493 197 108 1 493 197 108 1 493

Total Remuneration 0 0 488 123 13 847 1 684 166 14 838 2 174 750 16 475 2 369 336 17 950 2 400 926 18 189On-boarding 0 0 205 578 5 832 169 780 1 496 23 254 176 0 0 0 0

Fluctuation costs 0 0 3 762 107 11 868 105 13 993 106 14 218 108 14 446 109

Total EGSS costs 0 0 697 462 19 786 1 865 813 16 439 2 211 997 16 758 2 383 553 18 057 2 415 372 18 298

Attraction premiums 0 0 67 536 1 916 202 608 1 785 210 712 1 596 140 475 1 064 86 446 655

Grand total EGSS costs 0 0 764 998 21 702 2 068 421 18 224 2 422 709 18 354 2 524 028 19 121 2 501 819 18 953

Positive

Most

likely

Negative

Scenarios

1

2

3

Workforce costs development (EUR)

Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Base pay 0 0 296 198 8 403 1 000 452 8 815 1 330 789 10 082 1 511 228 11 449 1 564 121 11 849

Bonuses 0 0 36 480 1 035 187 717 1 654 242 238 1 835 245 013 1 856 245 290 1 858

Super gross 0 0 445 789 12 646 1 592 146 14 028 2 082 688 15 778 2 325 264 17 616 2 395 660 18 149

Benefits 0 0 45 656 1 295 157 064 1 384 197 108 1 493 197 108 1 493 197 108 1 493

Total Remuneration 0 0 491 445 13 942 1 749 210 15 412 2 279 796 17 271 2 522 373 19 109 2 592 769 19 642On-boarding 0 0 208 506 5 915 178 441 1 572 24 654 187 0 0 0 0


Total EGSS costs 0 0 704 527 19 987 1 945 099 17 137 2 325 216 17 615 2 546 891 19 295 2 618 101 19 834



Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Base pay 0 0 297 851 8 450 1 019 702 8 984 1 374 708 10 414 1 584 119 12 001 1 666 493 12 625

Bonuses 0 0 36 480 1 035 187 874 1 655 242 492 1 837 245 394 1 859 245 824 1 862

Super gross 0 0 448 003 12 709 1 618 152 14 257 2 167 048 16 417 2 451 548 18 572 2 562 506 19 413

Benefits 0 0 45 656 1 295 157 064 1 384 197 108 1 493 197 108 1 493 197 108 1 493

Total Remuneration 0 0 493 659 14 005 1 775 216 15 641 2 364 156 17 910 2 648 656 20 066 2 759 614 20 906

On-boarding 0 0 210 458 5 970 182 130 1 605 25 741 195 0 0 0 0

Fluctuation costs 0 0 6 928 197 25 431 224 34 066 258 38 926 295 44 255 335Total EGSS costs 0 0 711 045 20 171 1 982 777 17 469 2 423 963 18 363 2 687 582 20 360 2 803 869 21 241



y ( )



41/69


Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Base pay 0 0 244 826 6 945 813 465 7 167 1 084 657 8 217 1 193 230 9 040 1 293 421 9 799

Bonuses 0 0 36 480 1 035 187 434 1 651 244 291 1 851 244 413 1 852 244 537 1 853

Super gross 0 0 376 951 10 694 1 325 190 11 676 1 759 527 13 330 1 903 439 14 420 2 036 256 15 426

Benefits 0 0 45 656 1 295 157 064 1 384 197 108 1 493 197 108 1 493 197 108 1 493

Total Remuneration 0 0 422 607 11 989 1 482 255 13 060 1 956 636 14 823 2 100 548 15 913 2 233 364 16 919On-boarding 0 0 205 578 5 832 169 780 1 496 0 0 0 0 0 0


Total EGSS costs 0 0 631 946 17 928 1 663 902 14 660 1 970 629 14 929 2 114 765 16 021 2 247 810 17 029

Attraction premiums 0 0 18 910 536 37 820 333 54 029 409 37 820 287 27 014 205


Positive

Most

likely

Negative

Scenarios

1

2

3

Workforce costs development (EUR)

Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Base pay 0 0 246 893 7 004 842 518 7 423 1 153 566 8 739 1 291 498 9 784 1 424 717 10 793

Bonuses 0 0 36 480 1 035 187 717 1 654 244 746 1 854 245 013 1 856 245 290 1 858

Super gross 0 0 379 720 10 772 1 380 514 12 163 1 851 366 14 026 2 034 340 15 412 2 211 089 16 751

Benefits 0 0 45 656 1 295 157 064 1 384 197 108 1 493 197 108 1 493 197 108 1 493

Total Remuneration 0 0 425 376 12 067 1 537 579 13 547 2 048 474 15 519 2 231 449 16 905 2 408 197 18 244On-boarding 0 0 208 506 5 915 178 441 1 572 0 0 0 0 0 0


Total EGSS costs 0 0 638 458 18 112 1 733 468 15 273 2 069 240 15 676 2 255 967 17 091 2 433 530 18 436



Year 2013 2014 2015 2016 2017 2018

Costs structure

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Yearly

costs

Yearly

costs/FTE

Base pay 0 0 248 270 7 043 858 735 7 566 1 191 932 9 030 1 353 790 10 256 1 517 965 11 500

Bonuses 0 0 36 480 1 035 187 874 1 655 245 000 1 856 245 394 1 859 245 824 1 862

Super gross 0 0 381 566 10 825 1 402 457 12 356 1 925 488 14 587 2 142 907 16 234 2 363 478 17 905

Benefits 0 0 45 656 1 295 157 064 1 384 197 108 1 493 197 108 1 493 197 108 1 493

Total Remuneration 0 0 427 222 12 120 1 559 521 13 740 2 122 597 16 080 2 340 015 17 727 2 560 586 19 398

On-boarding 0 0 210 458 5 970 182 130 1 605 0 0 0 0 0 0

Fluctuation costs 0 0 6 928 197 25 431 224 34 066 258 38 926 295 44 255 335Total EGSS costs 0 0 644 608 18 287 1 767 082 15 569 2 156 663 16 338 2 378 941 18 022 2 604 841 19 734



EGSS workforce costs development (based on the respective staffing plan)

y ( )

Scenario B


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I. Introduction






VII. Appendices

I. Appendix 1-10

II. WF Cost Development per Teams

Table of Conte

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