2021 actual remuneration

The following section provides insight in how our remuneration policy was implemented in 2021 for both our Board of Management and Supervisory Board. The presented figures are at market value, unless stated otherwise. For IFRS based figures on the remuneration, see note 5.1 Remuneration of Supervisory Board, Board of Management and senior management of the 'Consolidated financial statements'.

Implementation of the remuneration policies

In 2021, we have overseen that all decisions made on Board of Management and Supervisory Board remuneration are in line with the remuneration policies as approved by the AGM in 2013 (regarding the 2019-2021 LTI plan) and 2020.

• No deviations took place from the decision-making process for the implementation of the remuneration policies.

• No temporary deviations took place from the remuneration policies.

• No remuneration has been granted and allocated by subsidiaries or other companies whose financials are consolidated by PostNL N.V. since all members of the Board of Management and the Supervisory Board are paid directly by PostNL N.V.

• No severance payments were granted to members of the Board of Management or the Supervisory Board.

• No variable remuneration has been clawed-back.

Total remuneration of Board of Management

Scenario analysis

In conformity with the Code, scenario analyses have been performed regarding the possible results of the variable remuneration elements and the impact thereof on the remuneration of the Board of Management members. On the basis of these analyses, which amongst others include a minimum performance scenario (0%) and a maximum performance scenario (100%) and share price variations (between 50% and 200%) the Supervisory Board deems the remuneration levels to be appropriate in view of the performance, respecting contractual agreements. Hence, no further measures are required in this regard.

External perspective

In line with our remuneration policy as adopted by the AGM in 2020, we benchmark our remuneration against a reassessed peer group at least every four years. The 2020 peer group, as defined in our remuneration policy, has not been altered since.

Internal perspective

We take the internal perspective into account in the implementation of the remuneration policy in order to ensure internal alignment with the remuneration of the Executive Committee, other senior management and employees who fall under a collective labour agreement. In 2021, we monitored the development of our internal pay ratios. The ratio between the annual total remuneration for the CEO and the average annual total remuneration of an employee was 23.8 for 2021. The ratio between the annual total remuneration of the CFO and the average annual total remuneration of an employee was 17.9 for 2021. The Supervisory Board is committed to the guiding principles as laid down in the remuneration policy and deems the alignment with the broader workforce important, as demonstrated by the consistent development of the internal pay ratios over the years. In table 'Performance/remuneration/internal pay ratio', we provide more detailed information on the (altered) calculation method and the development of the Board of Management remuneration versus the wider workforce.

Base salary

The base salaries for both members of the Board of Management were indexed in 2021, compared to 2020, in line with the remuneration policy.

The total remuneration of the Board of Management in 2021 (and 2020) is outlined in the following table:

PostNL Remuneration Board of Management in €
2020, 2021

• 1 Base salaries 2021 were indexed with 3.0%.
• 2 Other benefits include company costs related to tax and social security, pension allowances, company car and other compensation.
• 3 Pension costs represent the cash out for defined benefit scheme (net of employee contributions), risk premium for a net pension plan and the unconditional indexation for pension benefits accrued before 1 January 2001. In 2021, a payment for a conditional pension plan was made on behalf of Herna Verhagen, based on transitional rules.

Short-term Incentive (STI) 2021

PostNL Short-term Incentive
2021

The STI, which rewards the delivery of short-term performance taking into account the interests of multiple stakeholders, is based on annual financial and non-financial performance measures. Only fully achieved targets on these performance measures contribute to the STI payout.

STI payout is based on actual performance as assessed by the Remuneration Committee and summarised in the table above. The 2021 STI realisation amounts to 26.25% out of a maximum of 37.50%, which equals a payout ratio of 70%.

With a profitability of €308 million and cash generation of €288 million, we strongly outperformed target levels. Our strong annual results for 2021 are the result of solid results at Parcels & Logistics in the Netherlands and Belgium and good figures for Mail in the Netherlands due to unexpectedly high mail volumes.

In 2021 we observed a decrease in customer satisfaction compared to 2020, when we had actually seen a step up in customer satisfaction across the board, related in part to the continuation of our service since the start of the pandemic. Our 2021 customer score of 34% highly satisfied customers was below target level.

On the other hand, the employee engagement score remained high in 2021, with more than 84% engaged employees, and exceeded target level again. Performance on this point is in line with the benchmark figure in the Netherlands, but higher than levels seen across the logistics sector.

At Mail in the Netherlands we failed to reach the 95% target level. Quality levels were affected in a number of ways throughout the year, including a higher absenteeism rate due to Covid-19, in combination with strict quarantine rules resulting in increased mail deliverer vacancies in a difficult labour market.

Although the Parcel delivery quality remained very high throughout the majority of the year, the score ended up just below target level. Within the parcels organisation the focus in 2021 was on managing peaks realised by increasing sorting centre capacity, introducing additional delivery vehicles and the recruitment of new staff, but also by increased customer communication.

Long-term Incentive (LTI) 2019-2021

PostNL Long-term Incentive
2019-2021

The long-term incentive is a performance share plan that rewards long-term value creation to PostNL’s strategy and reinforces alignment with shareholder interests by granting shares. The plan is based on financial and strategic performance measures on which targets are set for a 3-year performance period. Since vesting schemes are being applied, a non-fully met target can still contribute to the LTI payout although overperformance against target does not lead to an upside (no stretch).

Year-end 2021, the LTI 2019-2021 performance period ended. The Remuneration Committee assessed the achievements of the Board of Management over the three-year performance period. Targets on each performance measure versus actual performance are summarised in the table above.

The LTI 2019-2021 was granted in 2019 and as such, originates from the previous remuneration policy as adopted by the AGM in 2013. The targets for ‘Underlying net cash income’ and ‘Cost savings’ and the related vesting schemes have been adjusted during the performance period for the acquisition of Sandd, in order to remain challenging and realistic.

Cumulative underlying net cash income of €584 million exceeded maximum target level, resulting in a pay-out ratio (% of annual base salary) of 12.5%. Due to lower than anticipated and delayed cost savings because of much more volume in 2021 and higher synergies with Sandd, we missed our cumulative cost savings threshold with €34 million. The performance on ‘New growth initiatives’ was overall assessed at very good. Despite the ongoing uncertainty and challenges that dominated the year 2021, focus remained on business development and (sustainable) growth opportunities within all business lines of the company, facilitating customers by growing an array of efficient, innovative and digital solutions.

The applicable number of performance shares will vest in 2022 and are subject to a two year holding period. This holding period aligns the long-term interest of the members of the Board of Management and our shareholders. The holding period furthermore ensures that the performance shares are held for a period of at least 5 years, in conformity with the Code (see also the section 'Share ownership' in this regard).

The market value of the shares is determined by multiplying the number of shares by the five-day volume weighted average share price of PostNL prior to 1 January 2022 at €3.8307 (2021: €2.8537). For the number of shares, we refer to note 5.1 in the 'Financial Statements' chapter.

The market value of shares granted, vested and those shares subject to a holding period are presented in the table at the next page.

PostNL Shares (market value) in €

• 1 The number of conditional shares granted is based on 37.5% of the annual base salary divided by the five-day average Euronext Amsterdam share price of PostNL prior to the date of publication of the Q1 2021 results (€4.479).
• 2 Conditional dividend shares were granted following the final dividend 2020 and interim dividend 2021.

Shares held by the Board of Management

PostNL Shares held by Board of Management in shares
2020, 2021

Share ownership

PostNL Share ownership as percentage of the minimum shareholding in %
2020-2021

The table provides an overview of the shares held at year end 2020 and 2021 by the CEO and CFO as percentage of the minimal shareholding (75% of annual base salary).

All members of the Board of Management are required to hold a specified value of PostNL shares. This minimum shareholding requirement fosters the identification of the Board of Management members with PostNL’s strategy and its shareholders and aims to ensure a sustainable link to the performance of the company. The minimum shareholding requirement for the CEO and CFO is equivalent to 75% of annual base salary. These minimum shareholdings can be built up over 7 years (effective date share ownership as part of the 2020 remuneration policy), for the current Board of Management members.

The CEO exceeds the minimum share ownership level, and the CFO has not reached the minimum level yet, whilst expecting to do so within the requisite period. The increased ownership level partially results from the increased average share price compared to last year.

Information on the change of remuneration and company performance

PostNL Performance/remuneration/internal pay ratio
(IFRS based)

• 1 Profitability is equal to normalised EBIT (see chapter 9 Financial value).
• 2 Earnings attributable to shareholders is equal to normalised comprehesive income (see chapter 9 Financial value).
• 3 Jan Bos stepped down as CFO on 17 April 2018 and acted as advisor to the Board of Management until 1 June 2018; Pim Berendsen was appointed as CFO on 18 April 2018.
• 4 Based on the total salaries, pensions and social security contributions (excluding the CEO and CFO) increased with the external temporary staff cost (from 2021 onwards) divided by the average number of FTE's (total of own personnel and external temporary staff) minus two as reported in the chapter 'Financial Statements' of the relevant years.
• 5 Herna Verhagen was CEO over the presented years.

The table provides an overview on the change of remuneration, company performance, average remuneration per FTE and internal pay ratios over the last 5 financial years (IFRS based). In line with the Code, the remuneration of the Supervisory Board is not related to the company performance and paid in cash only. Therefore, the Supervisory Board is excluded from this table. For an overview of the total remuneration of the Supervisory Board over the last five years, we refer to table 'Five year overview total remuneration Supervisory Board'.

Internal pay ratios

The ratios between the annual total remuneration for the CEO and CFO and the average annual total remuneration for an employee was 23.8 for the CEO in 2021 and 17.9 for the CFO in 2021. As from 2021 onwards, external temporary staff will be taken into account in the internal pay ratio calculation. This means that all FTE's of external staff hired during 2021 have been taken into account when calculating the average number of FTE’s. The related costs (note 2.1.3 , external temporary staff costs) are included in the calculation of the average remuneration per FTE. For administrative reasons, it is not feasible to make a distinction between external staff who have worked shorter/longer than 3 months for PostNL during the calendar year, as the Code prescribes. As a result, no distinction is made in the duration of the activities performed by external staff for PostNL. The pay ratios 2021 excluding external temporary staff would have been 24.2 for the CEO and 18.2 for the CFO.

Total remuneration of the Supervisory Board

PostNL Total remuneration Supervisory Board in €, 2020, 2021

• 1 Nienke Meijer and Koos Timmermans were appointed as member of the Supervisory Board as per 20 April 2021
• 2 Agnes Jongerius, Thessa Menssen and Eelco Blok were no longer member of the Supervisory Board as per 20 April 2021

The total remuneration of the Supervisory Board in 2021 (per individual member) and 2020 (as a total) is presented in the table on the right.

In line with the remuneration policy as adopted by the AGM in 2020, the Supervisory Board members are entitled to a Board fee and one or more fixed Committee fee(s). The members of the Supervisory Board receive no compensation related to performance and accrue no pension rights with the company.

As such, their remuneration is 100% fixed. The members of the Supervisory Board receive no severance payments in the event of termination. PostNL does not grant loans, including mortgage loans, advance payments, guarantees and options or shares to any member of the Supervisory Board.

A five year overview of the total remuneration of the Supervisory Board is presented in the table on the right.

PostNL Five year overview total remuneration Supervisory Board in €, 2017-2021

Proposed revision of the Board of Management remuneration policy from 2022

We have the intention to make two adjustments to the 2020 remuneration policy of the Board of Management. The proposed remuneration policy revision, which is intended to become effective as from 1 January 2022, will be put forward for a binding shareholder vote at the 2022 AGM.

The proposed adjustments are limited to the LTI performance measures and their weighting:

1. Change from two segment-based free cash flow performance measures (free cash flow Mail in NL and free cash flow Parcels) to one free cash flow performance measure at PostNL level;

2. Change the weighting of the resulting three performance measures into 33.33% each.

No other changes are being proposed.

Since the LTI has no stretch opportunity and the free cash flow performance measures in the current remuneration policy were set at segment level, outperformance on free cash flow in one segment does not compensate for performance in the other segment, whilst the Board of Management is responsible at PostNL level. Consequently, we deem performance measures on segment level undesirable and propose to set the performance measure free cash flow at PostNL level. To underpin the remuneration policy’s guiding principles ‘simple’ and ‘transparent’, we propose to redistribute the performance measures equally (i.e. 33.33% per performance measure). Furthermore, 33.33% weighting indicates equal importance from a strategic point of view.

Several internal and external stakeholders have been consulted in drafting the revised remuneration policy. During this roadshow, PostNL engaged with investors, proxy advisors, investor representatives and employee representatives. Based on the feedback received, no further adjustments were made.

On 8 March 2022 the agenda for the AGM will be made public including the revised remuneration policy proposal for the Board of Management.

Impact of the new remuneration policy

The remuneration policy for the Board of Management contains the following adjustments compared to the previous (2020-2021) policy as presented in the table:

PostNL LTI performance measures (incl. weighting)