Friendly, major employer

Remuneration for most of JSW's employees is paid on the basis of collective labour agreements terminated effective from 1 January 2010. Remuneration for employees hired after 15 February 2012 is set in accordance with rules specified in new employment contracts. In accordance with internal regulations, JSW's employees are entitled to remuneration for work, consisting of a base salary, bonus or excess payment, Miner's Card (long-service bonus), functional bonus (e.g. longwall face bonus), bonus for work in burdensome, harmful and hazardous conditions. Hiring employees for appropriate jobs and assigning job categories take place on the basis of a workplace table.

Irrespective of the aforementioned components of pay, JSW's employees are entitled to additional benefits such as annual Miner's Day award, Barbórka payment, additional annual award, free coal allocation, anniversary awards, pension/disability severance payment, cash equivalent for travel on leave, equivalent for school supplies. In addition, employees can be entitled to a motivational bonus and an occupational health and safety bonus.

Based on new employment contracts, employees are entitled to remuneration consisting of a base salary and a long-service supplement. Irrespective of the aforementioned components of remuneration, employees hired on new contracts are entitled to the following additional benefits: annual Miner's Day award, additional annual award, free coal allocation, pension/disability severance payment, cash equivalent for travel on leave, equivalent for school supplies. In addition, employees can be entitled to a motivational bonus and an occupational health and safety bonus.

The average monthly remuneration in 2019 was significantly influenced by agreements with trade unions in 2018 and 2019 as well as the Management Board's decisions:

• Agreement between JSW's Management Board and the trade unions dated 19 February 2018 (concerning remuneration for work on off days, Sundays and holidays, leave compensation and sick pay) and 28 March 2018 (regarding schools supplies and Miner's Card tickets), which introduced consistent rules for these benefits across JSW.
• Agreement between the Management Board and the trade unions executed on 11 June 2018, pursuant to which on 1 June 2018 base pay rates increased and rules and authorisations for long-service bonus, i.e. Miner's Card, were harmonised across JSW.
• Agreement executed on 2 July 2019 between the Management Board and the trade unions, pursuant to which on 15 July 2019 JSW's employees received an additional cash bonus.
• Agreement between the Management Board and the trade unions executed on 24 October 2019 regarding a list of jobs entitled to preventive meals, as referred to in the Ordinance of the Council of Ministers of 28 May 1996. Moreover, on 6 November 2019 the Management Board and the trade unions signed an agreement on entitlement to meals for days worked by JSW employees that did not fall under the Ordinance of the Council of Ministers of 28 May 1996. The provisions of these agreements enter into force on 1 January 2020.

As regards risks related to remuneration, it should be noted that the market situation in 2020, i.e. inflation and wage growth at other companies, may result in employee/trade unions demands for wage increases.

Mutual relations between the Employer and the Employees are regulated by national laws and internal regulations. Some of them cannot be adapted to current market conditions and can constitute a significant burden on JSW's proper functioning. There is no collective bargaining agreement in effect at any of JSW's mines, the Production Support Entity and the Management Board Office. These agreements were terminated or, as in the case of KWK Budryk, the employer was required under art. 241⁸ §1 of the Labour Code to apply it for a period of one year from the date on which the mine became part of JSW. Rules for remunerating the employees of KWK Knurów-Szczygłowice result from an agreement executed at Kompania Węglowa in 2004. Despite this, JSW applies the rules contained in the aforementioned collective labour agreements and Agreements. A lack of internal labour law motivates the Employer to negotiate and implement a collective labour agreement. A draft collective labour agreement proposed by the Employer that incorporated the provisions of agreements dated 23 February and 16 September 2015 was criticised by the trade unions and by employees who read the draft after it was published on the website of trade union ZZ Jedność. Negotiations on the collective labour agreement were resumed at the beginning of 2016. Due to the comments raised by ZZ Jedność regarding compliance with representativeness conditions by certain trade unions, the negotiations were stopped. In March 2017, the District Court confirmed the representativeness of the trade unions ZOK NSZZ „Solidarność” JSW S.A., ZZ „Kadra” Pracowników JSW SA, Federacja ZZG JSW S.A. Currently, works on a collective labour agreement are suspended due to talks at a ministerial level regarding a supra-company collective labour agreement for the mining industry.

In accordance with labour laws, the Group pays employee benefits as follows:

• post-employment benefits: retirement/disability severance payments, additional disability payments, post-mortem payments,
• other long-term employee benefits: long-service awards,
• other benefits for employees: unused holidays.

In its statement of financial position, the Group recognises an employee benefit liability in an amount corresponding to the present liability at the end of the reporting period, taking into account actuarial gains and losses. The amount of post-employment benefit liability in the form of defined benefit plans and other long-term employee benefits is calculated by an independent actuarial advisory firm using the projected unit credit method until this liability expires. Details on the amounts of benefits are presented in Note 7.14. to the Group's consolidated financial statements for the financial year ended 31 December 2019.