Salaries and Benefits Expense

6 Months Ended

Jun. 30, 2011

Salaries and Benefits Expense [Abstract]


3.	SALARIES AND BENEFITS EXPENSE

Severance Costs

As part of the Company’s 2011 Operational Review, the Company incurred severance costs of $55 million in the six months ended June 30, 2011 (three months ended June 30, 2011: $9 million). These costs relate to approximately 600 positions that have been eliminated (three months ended June 30, 2011: approximately 150 positions).

$49 million of these severance costs for these employees were recognized pursuant to a one-time benefit arrangement, with the remaining $6 million recognized pursuant to the terms of employees’ existing benefit arrangements or employee arrangements. All of these costs have been recognized within salaries and benefits.

In addition to the severance incurred as part of the 2011 Operational Review, an additional charge of $2 million in the six months ended June 30, 2011 (three months ended June 30, 2011: $nil) was recognised within salaries and benefits relating to the waiver of retention awards held on the balance sheet for the approximately 600 positions that have been eliminated.

The Company’s severance liability under the 2011 Operational Review was:


	June 30,
	2011
	(millions)

Balance at January 1, 2011	$	—
Severance costs accrued		55
Cash payments		(29	)
Foreign exchange		—

Balance at end of period	$	26

It is estimated that a total of $70 million will be incurred under the 2011 Operational Review for severance throughout 2011 across the Group.

The Company evaluates the performance of its operating segments based on organic revenue growth and operating income. For internal reporting and segmental reporting, segmental management are not held accountable for certain items deemed to be centrally-controlled costs and initiatives, which includes the 2011 Operational Review. See Note 18 — Segment Information for an analysis of centrally-controlled costs and initiatives, including the 2011 Operational Review costs, disclosed within ‘Corporate and Other’.

Severance costs also arise in the normal course of business and these charges amounted to $nil in the six months ended June 30, 2011 (2010: $11 million). Of these costs, $nil was incurred in the three months ended June 30, 2011 (2010: $3 million).

Other Salaries and Benefits Expense

The Company also incurred other salaries and benefits costs as part of the 2011 Operational Review of $35 million in the six months ended June 30, 2011 (three months ended June 30, 2011: $1 million) relating primarily to the buy out of previously existing incentive schemes and other contractual arrangements.

Cash Retention Awards

As part of the Company’s incentive compensation, the Company makes annual cash retention awards to its employees. Employees must repay a proportionate amount of these awards if they voluntarily leave the Company’s employ (other than in the event of retirement or permanent disability) before a certain time period, currently up to three years. The Company makes cash payments to its employees in the year it grants these retention awards and recognizes these payments ratably over the period they are subject to repayment, beginning in the quarter in which the award is made. The unamortized portion of cash retention awards is recorded within Other Assets.

The following table sets out the amount of cash retention awards made and the related amortization of those awards for the three and six months ended June 30, 2011 and 2010:


	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
	(millions)

Cash retention awards made	$	11	$	16	$	206	$	185
Amortization of cash retention awards included in salaries and benefits		44		32		88		60

Unamortized cash retention awards totaled $293 million as of June 30, 2011 (December 31, 2010: $173 million; June 30, 2010: $217 million).