8.1.Human Resources
and Social Policy

TMK’s HR policy sets out priority areas for the development of the Company’s human capital we need to focus on to achieve our strategic business goals.

In a volatile economic environment, we have placed priority on retaining highly skilled staff, streamlining our governance system and standardising the organisational structure at TMK’s entities. We also believe it important to keep our staff up to date with current developments, our achievements and future plans. We achieve our targets through shared understanding of goals and objectives, strong performance of the Company’s management, and building a dialogue with our social partners.

We seek to consistently enhance our staff’s performance by continuously raising their qualification and professional level while eliminating inefficient functions, reducing non-production losses and reducing the number of management layers.

Key priorities of TMK’s HR Strategy in 2015:

Corporate Development and Headcount Management

In 2015, we placed a particular emphasis on minimising the negative impact of economic shocks on our performance through cost optimisation and improvements to our corporate governance system. To this end, we:

• Implemented a significant part of the project to standardise organisational structures at the Company’s entities, while enhancing the management role of the Corporate Centre, where a considerable portion of such functions as internal audit, economic security and IT have been co-located
• Streamlined key business processes, primarily, product quality control, supply and procurement, and logistics
• Set function-specific internal benchmarks to organise business processes and streamline our headcount. By adopting best management practices at the Company’s entities we optimised our staff costs and reduced the number of management levels within the Company.

As a result of our efforts, we successfully reduced the average total headcount, even as the number of TMK’s entities grew.

TMK’s average headcount

	2013	2014	2015
Average total headcount	44,025	43,373	41,943
Change in total headcount from 2013, %: including:	100	–1.5	-4.3
Russian division	100	–1.6	–3.2
European division	100	+1.5	+1.8
American division	100	–2	–30
Middle East division	100	+16	+12.4

Employee development and training

We make consistent efforts to motivate employees towards achieving professional growth and to foster an environment supportive of such growth.

In 2015, TMK invested about USD 1.5 m in corporate training and career enhancement programmes, which enabled us to continue the implementation of a number of initiatives, including

• Company-wide training programmes such as Efficient Manager, Internal Corporate Coach, and Lean manufacturing
• Partnerships with local authorities in running educational programmes in the communities where we operate. The construction of training grounds at colleges in Polevskoy (the Seversky Tube Works) and Kamensk-Uralsky (the Sinarsky Pipe Plant) are good examples of such efforts
• Participation in the government-sponsored programme of the Russian Federation for the development of Professional Standards. For instance, in 2015, we developed standards for such key pipe production professions as: pipe and billet cutting, hot rolling; cold rolling, and electric-welded pipe production
• Over 200 internships for our employees to share best manufacturing practices across TMK’s facilities
• The eleventh TMK Youth Scientific and Technical Conference held by the Company in Sochi and attended, along with young specialists employed by TMK’s Russian, European and American divisions as well as by representatives of the Middle East division of TMK, for the first time in its history.
• The roll-out of the Management of Leaders programme at TMK IPSCO’s facilities to recruit and train potential candidates to fill management positions in the Company
• Implementation of the TMK IPSCO Way development programme for key employees. Over 500 managers and employees of TMK IPSCO enrolled in this programme.

We seek to recruit young talent trained to advanced educational standards, and to this end we get involved in their professional training through collaboration with educational institutions in the countries and regions where we operate.

• In Russia, they include the Yeltsin Ural Federal University (UrFU) and the National University of Science and Technology (MISiS). In 2015, TMK signed a Cooperation Agreement with the Endowment Fund of MISiS to engage in co-financing of research programmes run by the Department of Pressure Metal Treatment.
• In the United States, the American division’s facilities closely cooperate with Colorado School of Mines, University of Oklahoma, University of Pittsburgh, University of Iowa, Missouri S&T, and Texas Tech, including arrangements for internships at ТМК IPSCO’s plants.
• In the Middle East, TMK GIPI (Oman) organised selection and training of local engineering students in UrFU (Russia), with a view to subsequently offer them employment at TMK GIPI.

Employee compensation and incentives

In 2015, we focused on building a staff motivation system that would be adaptive to changes in operational and strategic objectives.

We drafted our Concept of Unified Remuneration System for the Russian division’s facilities, providing for standardisation of all types of financial compensation for employees and linking remuneration to performance against individual KPIs by the relevant employee. This will help to enhance the motivational role of wages and salaries and automate pay calculation. The project is scheduled for implementation in 2016–2017.

The Company reviews the base remuneration rates for its staff on an annual basis, taking into account the macro-economic situation, regional trends in the labour market and staff performance. Using this approach, we were able to raise the pay levels of the Company’s employees (in the respective local currencies of the countries they are based in) while keeping our overall payroll figures relatively flat. In a challenging market environment, the Company makes sure that its wages and salaries remain competitive in the regions where TMK’s facilities operate, while meeting its social obligations, making cost-of-living adjustments to salaries provided for in agreements with industry trade unions, and complying with national laws.

Nevertheless, due to currency swings, the average pay at TMK’s facilities has been trending downward over the last two years if translated into US dollars.

Social partnership

In 2015, our stability and success relied, among other things, on the social partnership maintained with trade unions of TMK’s entities, and with national industry associations of trade unions.

Average pay at TMK (2013–2015), %

	2013	2014	2015
Average pay (in USD) as % of the previous year level	109	95	72

Entities across divisions strictly follow the principles of social partnership, balancing the interests of all stakeholders:

Russian division

In 2015, TMK, as a member of the Russian Metallurgists Association, was actively involved in negotiations with the Russian Mining and Metallurgical Trade Union on a supplementary Agreement that would extend the current Branch Tariff Agreement to 2016. This will allow us to bring budget indicators of TMK’s Russian entities in line with the rates set out in the 2016 Branch Tariff Agreement.

We are actively engaged, through Non-Profit Partnership Russian Steel, in building a consolidated industry position on production, technologies, investments and further representation of professional interests of Partnership Members before government and other institutions and organisations.

American division

TMK IPSCO and the US United Steelworkers Union maintain successful relationship under the Collective Bargaining Agreement the Ambridge and Koppel plants.

European division

The negotiations on the terms of the Agreement with Romanian trade unions served as the basis for Collective Bargaining Agreements at TMK-ARTROM and TMK-RESITA.

Middle East division

The motto of TMK GIPI, “We Add Value in Everything We Do”, reflects the company’s approach to all areas of its activity – both in business and social initiatives. TMK GIPI is actively involved in infrastructure projects and provides financial support to initiatives of the Municipality of Sohar (Oman).

92 employees

of TMK were recommended for national and industry awards

282 employees

were awarded corporate merit badges and certificates

14 people

were awarded Merit Badges and Certificates For Business Cooperation with TMK

In 2015, we continued financing all our programmes aimed at improving health and expanding the range of recreation opportunities for our staff, in particular:

• 2,550 employees and their family members went to the Burgas resort in Sochi and the Hotel-Sanatorium Westend in Marianske Lazne (Czech Republic)
• We continued the implementation of the Corporate Pension Programme in conjunction with the Bolshoy Pensionny Fond non-government pension fund, which receives the “accumulative portion”, or funded component, of retirement benefits payable to employees of the Company’s Russian division.

We attach particular importance to non-financial motivation and recognition of our best employees and business partners: 92 employees of TMK were recommended for national and industry awards, 282 employees were awarded corporate badges and certificates, while 14 people were awarded Badges and Certificates For Business Cooperation with TMK.

Successful implementation of the Company’s social policy ensures social stability in our teams and in the regions where we operate.