Dutch Financial Undertakings (Remuneration Policy) Act
A bill in respect of remuneration in the Dutch financial sector is currently being debated in the senate: the Dutch Financial Undertakings (Remuneration Policy) Act (Wet beloningsbeleid financiële ondernemingen; the Act).
The proposed rules apply to all financial undertakings that are regulated by the Dutch Financial Supervision Act (Wet op het financieel toezicht) and have their statutory seat in the Netherlands. Such financial undertakings have to ensure that their subsidiaries, in and outside the Netherlands, also comply with the Act. If the financial undertaking is part of a group and the holding company has its statutory seat in the Netherlands, the new rules also apply to all group companies. An exception applies if the main activities of the group are not within the financial sector.
The Act not only provides rules for the remuneration of certain identified staff, but applies to all people working under the responsibility of financial undertakings (i.e. including contractors and secondees).
The most important changes are discussed below.
20% cap on variable remuneration
Variable remuneration is maximised at 20% of the fixed salary. Variable remuneration is defined as all remuneration that is not fixed remuneration. Fixed remuneration is that part of the total remuneration that consists of unconditional financial and non-financial advantages as detailed in the remuneration policy of the undertaking or in agreements in respect of work to be performed for the undertaking.
The bonus cap also applies to branch offices in the Netherlands of foreign financial undertakings (with the exception of certain EU banks and investment firms).
The Act contains several exceptions: for example where a person mainly works outside the Netherlands. Furthermore, prior approval of the regulator to pay a higher variable amount can be asked for if a bonus is necessary to retain a person for the undertaking after a takeover.
A transitional law provides that in 2015 bonuses in respect of 2014 that exceed the 20% cap can be paid if based on existing agreements.
Guaranteed variable payments are prohibited
Guaranteed variable payments are not allowed. An exception applies if a new person is hired, who is in his first year of employment when the variable payment is granted, and the company meets certain capital requirements.
If a financial undertaking is obliged to draw up an annual report, it has to include a description of its remuneration policy. This description must include the total amount of variable remuneration paid in the relevant year, and information on the number of people receiving a total yearly remuneration exceeding EUR 1 million and the business unit they work for. This information should also be published on the website.
Maximum severance payment
Financial undertakings are not allowed to pay severance payments exceeding 100% of the fixed yearly salary of the relevant person. Until 1 July 2015, this does not apply to agreements entered into before 1 January 2015.
No severance payment can be paid if the person resigns, in case of imputable acts or omissions, or, in case of a day-to-day policymaker, ‘failure’ of the company.
The Act provides for an obligation for financial undertakings to lower or reclaim variable remuneration, in case the person does not meet the standards of competence and correct behaviour, or was responsible for actions as a result of which the financial situation of the undertaking deteriorated substantially.
The Dutch government aimed at an effective date of 1 January 2015. However, the senate has not yet adopted the bill.