IBM Human Resources

Understanding Pay at IBM

© 2013 IBM Corporation

 IBM’s Compensation Strategy

Our compensation strategy remains unchanged and continues to align to our

business priorities

Pay competitively
Markets for jobs drive pay Attract and retain the best talent and skills
rates – up or down
Ensure labor costs are competitive
Focus on competitive pay
levels over time

Pay for performance

Rewards based on business
Reward skills and behaviors that clients value
and individual performance
Investments to pay the Drive profitable growth
“best like the best”

Differentiate strongly
Differentiation driven by
results, not only effort
Reward those who help us
to change
Drive a high performance culture
Align employee goals with our strategy and
values

2 May 2013 IBM Confidential © 2013 IBM Corporation

 Compensation Program Changes

Beginning in 2014, compensation programs will be aligned by performance

and market-based insights at distinct times

Current….
2H IPL

1H IPL TCR Effective 7/1

Early Dec
Effective by 3/31
PBC GDP MBA Equity
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

IPL = Incentive plan letter = Performance related = Market/Retention related

Future….
2013 transition: Employee Salary Program effective October 1; Focus on competitive pay and market adjustments
2014 new approach:
– Performance-based compensation programs in 1Q: Aligns Top Contributor Rewards (TCR), with PBC results and
Growth Driven Profit-sharing (GDP) or year-end sales incentive payments
– Market based adjustments and equity decisions in 4Q: Based on individual’s skills, pay competitiveness and market
movement

Effective by 3/31 Effective 12/1

1H IPL GDP 2013 ESP MBA
Effective 4/1 Effective 7/1 eff. 10/1 Early Dec
PBC TCR 2H IPL Equity
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

3 May 2013 IBM Confidential © 2013 IBM Corporation

 HR Program Lifecycle

This new approach strengthens the connection between performance, career

development, and compensation activities for managers and employees

Performance-based Ongoing skills and expertise Market-based

planning and development and career planning and
communication (1Q) conversations (2Q/3Q) communication (4Q)

Previous year PBC Sales and technical recognition PBC team-based

close-out decision-making
Leadership identification & career
PBC goal-setting development discussions Employee equity cycle
Sales plan letters (1H) Skill development & career Targeted retention
GDP planning and payments framework updates Market-based (Market
Performance-based (Top Mid-year performance discussions Based Adjustments)
Contributor Rewards) salary Sales plan letters (2H) salary increase planning
increase planning and and communication
communication (eff. 4/1) (eff. 12/1)

Focus throughout the year on:

Coaching/Mentoring Recognition Business critical retention

Think 40 (skills enrichment) Promotional considerations Career conversations

4 May 2013 IBM Confidential © 2013 IBM Corporation