Social Policy of the Company

Each employee of the Company has equal opportunities in exercising their labour rights and freedoms. Moreover, the Company is actively engaged in negotiations with employees for signing or amending the collective bargaining agreement, strictly observes the time limits for negotiations and ensures functioning of appropriate commissions, provides information necessary to conduct negotiations, strictly fulfils the conditions of the collective bargaining agreement.

In accordance with the labour law, any employee has the right to participate through their representatives in collective negotiations and drafting of the collective bargaining agreement as well as to review the signed collective bargaining agreement.

The Company’s activities impose no restrictions on the rights to freedom of association or collective bargaining by types of activities or on territorial basis. Being a socially responsible company, we fully support this right and create a favourable environment for exercise of employees’ rights to freedom of association.

In order to maintain social stability in the workforce of KMG Group, the Company takes a set of actions aimed at preventing discontent and tension among employees of SDEs. The taken actions allow companies to control the situation and maintain business continuity.

For example, social assistance to employees contributes significantly to maintaining the social stability of workforce.

Currently, 25 production companies of KMG Group have collective agreements in place, which cover 50,163 employees, i.e. 96 %.

In connection with the expiration of the deadlines for 2023, collective bargaining agreements were signed in a new edition at Mangistaumunaigas JSC, KazTransOil JSC, CASPI BITUM JV LLP, and an additional agreement was signed at OSC LLP and Kazakhoil Aktobe LLP, in which the amounts for a number of social payments were increased taking into account the current standards for KMG Group. At the initiative of employees, new collective bargaining agreements were signed at KPI LLP and KMG Security LLP.

In 2023, negotiations on conclusion of collective bargaining agreements with new conditions at OMG JSC, KBM JSC, OMC LLP, KazGPP LLP, PetroKazakhstan Oil Products LLP, ITC LLP were started.

All collective bargaining agreements of KMG Group provide for more than 35 forms of social assistance for employees and their family members as well as retirees.

KMG provides its employees with guaranteed social package that includes various types of social allowances, securities and compensations: material assistance for health improvement to annual leave, maternity benefits, monthly payments to employees on leave for childcare until children reach the age of 1.5, compensation for termination of employment in case of impossibility to transfer to another job, due to full loss of capacity, disability, one-time payment in case of death of the employee for funeral, one-time payment to the family of the employee who died as a result of a job-related accident.

The Company also provides social securities for voluntary medical insurance in case of illness and organisation of rest for employees’ children in children’s health camps in Kazakhstan.

In addition, the employees may be provided with additional types of social assistance. These forms of social assistance are set forth in collective bargaining agreements or internal regulatory documents of the enterprise. Such payments include payments for the anniversary date, retirement age, marriage, short-term leave in case of marriage, childbirth, death of relatives, for medical care and surgeries in case the costs exceed the insurance limit, benefits for disabled children of employees, benefits for employees in desperate need, school supplies for the first of September, assistance to employees in desperate need, etc.

In 2023, KMG Group retained all social benefits and securities and paid in accordance with collective agreements. Overall, in 2023, the social assistance to the employees and retirees was provided for the amount of over KZT 27.65 bln.

KMG places special emphasis on implementation of internal socially-oriented programmes. In promoting them, the emphasis is primarily placed on creating a favourable environment for the Company’s employees. These are activities of material inducement, retention and professional development, and ensuring workplace safety. The prevention of social tension, labour disputes and conflicts is a particular area of focus.

There is constant and constructive communication with employees and their representatives. A unified internal communication system is designed to improve efficiency of feedback.

All facilities hold mandatory scheduled meetings between management and employees to discuss social, domestic, work issues.

The key objective of the internal communication system is to inform employees in a timely manner about the goals and objectives of operations, to communicate the current situation in the company to employees, and to “hear” the issues raised by employees.

All KMG’s production companies allow each employee to address questions to the company’s management and receive a timely response by introducing internal communication tools, according to which the systematic biannual performance assessment meeting are held between CEOs and employees. CEOs in their reports present the current situation to the team: economy, availability of work volumes, production plans, labour protection, personnel and social issues. At the meetings, employees may ask their questions and get answers to them. In 2023, 101 reporting meetings were held covering 14,000 employees of KMG SDEs, where employees raised more than 500 questions. The main issues raised by employees at the meetings were salary increases, employment of employees’ children, point issues related to medical care, and issues related to improving working conditions, including the need to repair or construct buildings and premises. Appropriate explanations were given to employees on all issues and decisions were made.

In addition, in order to create and maintain effective channels of direct communication between employers and employees in SDEs, to inform employees in a timely manner about goals and objectives of operations in SDEs, to communicate the current situation in the company to employees, to create a positive image of the company among employees, to monitor the social and psychological climate among the workforce, the SDE CEOs receive employees on personal matters, each SDE has a CEO blog and a corporate information board, corporate information website, displays for video announcements are installed to communicate internal corporate information to employees. Information stands are used to bring prompt announcements and messages to the notice of employees.

If the working conditions change, the Company notifies the employee in writing at least fifteen calendar days in advance. The minimum notice period for significant changes in the Company’s operations is 4 weeks.

Meetings are held between the management and SDE trade union on a quarterly basis to address the most pressing issues concerning the implementation of the collective agreement, labour discipline, handling of employees’ appeals, health and safety issues, social benefits and compensation and other socially important issues in the company.

At the end of 2023, KMG’s social stability index was satisfactory – 75 %⁹. In 2022, the index was 74 %.

Based on the results of the Samruk Research Services survey, each enterprise develops Action Plans to minimise and eliminate the areas of concern identified in the Social Stability Index measurement. The Plan’s activities include actions to improve the level of satisfaction of employees, trust in the actions of the management, establishing a feedback system, improving working conditions, accommodation, catering, etc.

In 2023, the Corporate Centre developed a uniform form of the SRS improvement plan for all SDEs, and introduced the practice of visiting SDEs and assisting in developing action plans to improve the social stability index. In the current year, PetroKazakhstan Oil Products LLP jointly with the Social Engagement and Communications Centre conducted in-depth sociological survey.

During 2023, there were a number of unauthorised strikes amongst contractor employees and some employees of SDEs. Negotiations with leaders of trade union committees and meetings with employees were held, as well as actions were taken to reduce the wage gap between the Company’s employees and contractors. At the end of 2023, the number of strikes in KMG SDEs and their contractors decreased by 59 % in Mangistau Region (9 strikes in 2023 compared to 22 strikes in 2022).

For reference

The SRS social stability index is an indicator of social stability. Social stability is the systematic development of the company with a minimum of conflicts in the team. The SRS methodology suggests that social stability requires a favourable situation within the company (Engagement Index), a satisfying standard of living for employees (Social Wellbeing Index) and the absence of explicit conflicts and protest attitudes (Social Calmness Index).

KMG Group works to improve labour and recreation conditions on a systematic basis. The issues of organising accommodation and catering for employees are described in the plans of SDEs to improve social stability. In addition, in 2022, all KMG SDEs developed separate roadmaps for 5 years (2023–2027) to improve labour and recreation conditions for employees in order to strengthen this work.

In accordance with the plans of SDEs, in 2023, more than 40 social infrastructure facilities (canteens, administrative and production buildings, residential camps, etc.) were to be built, and 115 overhauls of social infrastructure facilities were to be carried out. However, based on the results of the audit of OMG’s financial and economic activities, a plan for construction, expansion and repair of facilities for 2023–2024 was developed. The list included about 100 facilities requiring prompt action.

Trade Unions

The Company interacts with trade unions as part of the social partnership established by the labour law at the industrial and regional levels. At the industrial level, the main interaction parameters (social securities, labour organisation, principles of remuneration, employment, gender and youth policy, occupational health and safety, prevention and resolution of labour conflicts, etc.) are set forth in the Sectoral Agreement in Oil & Gas, Oil Refining and Petrochemical Industries of Kazakhstan, which was developed with active involvement of representatives of KMG and its companies.

KMG Group has 42 trade unions that protect the interests of 44,430 employees.

At the regional level, the regional committees for social partnership operate, which, apart from regional employment and occupational health issues, deal with specific collective labour disputes. All KMG companies have conciliatory committees in place.

KMG, together with its subsidiaries and affiliates, actively participates in the work of the Sectoral Commission on Social Partnership and Regulation of Social and Labor Relations in the Oil and Gas, oil refining and Petrochemical Industries, which examines the current situation among employees of companies, the development of sectoral qualifications frameworks and professional standards, issues of human resource development in the oil and gas, oil refining and petrochemical industries.

KMG is implementing the Sectoral Agreement in Oil & Gas, Oil Refining and Petrochemical Industries for 2023–2025.

The key provisions of this Agreement in terms of improving social security of employees, enhancing the role of trade unions, ensuring safe working conditions and labour protection, etc. are being implemented. KMG SDEs adhere to the minimum levels of inter-category coefficients and the minimum monthly wage rate of a first-category worker in terms of establishing industry-specific principles of the labour remuneration system.

In 2023, more than 166 appeals from employees of KMG SDEs and citizens were considered. A significant number of appeals were received from the Mangistau Region with a request for employment in KMG Group. Special attention was paid to the consideration of issues of violation of the rights of KMG Group employees. Each such appeal was reviewed by the HR Management Department in detail, the validity of decisions made, their compliance with the laws of the Republic of Kazakhstan and internal procedures of the enterprise were checked.

Appropriate responses were provided to the applicants. Practical recommendations were also given on the organisation of HR and social work at the enterprise.

Cooperation with Contractors and Ensuring the Social and Labour Rights of Contractors’ Employees

In order to ensure social stability in the Mangystau, Atyrau, and Pavlodar Regions, since the beginning of 2022, KMG has been working to reduce the wage gap between our SDEs and their contractors. The following actions have been taken for this purpose:

• wages for employees of contractors have been increased;
• a decision has been taken to index contractors’ wages annually to the inflation rate, similar to the client’s wages;
• a guaranteed social package has been introduced for employees of contractors.

The work has been coordinated with the Interdepartmental Headquarters for solving problematic issues of Zhanaozen city, as well as Atyrau and Pavlodar Regions.

KMG SDEs in Mangystau Region have entered into 158 additional agreements with contractors, providing for these changes and, accordingly, an increase in rates for services. The actions taken to increase wages cover more than 19 thousand employees. On average, the increase in wages is about 35-40 %. In monetary terms, the amount of additional agreements signed is KZT 37.2 bln.

In Atyrau Region, Atyrau Refinery has entered into 12 additional agreements (2 additional agreements are in the process of signing). The actions taken to increase wages cover more than 1.3 thousand employees. On average, the increase in wages will range from 13 to 76 %. In monetary terms, the amount of additional agreements signed will be KZT 3.5 bln.

In Pavlodar Region, Pavlodar Oil Chemistry Refinery has entered into 29 additional agreements. The actions taken to increase wages cover more than 2.4 thousand employees. On average, the increase in wages ranges from 14 to 56 %. In monetary terms, the amount of additional agreements signed is KZT 5.9 bln.

Since June 2022, the Representative Office of KMG (hereinafter, the Representative Office) has been operating in Aktau. Close cooperation has been organised with government agencies through interdepartmental and regional headquarters and commissions. The Representative Office attended 38 meetings and solved problematic issues of 96 enterprises of the Region.

The work with trade unions is well established, 161 MoM decisions have been made based on the results of 25 meetings held with them, of which 125 have been implemented and 36 are in the process of implementation.

Within the framework of the existing Regulations of the Unified Internal Communications System, about 80 reporting meetings of the CEOs of SDEs with about 25,000 employees were held. All the issues raised have been reviewed and taken under control.

Legal and administrative advice has been provided, as well as legal assistance to teams. 18 internal mediators have been trained to participate in the settlement of conflicts, labour disputes, and to assist participants in finding a mutually acceptable solution. Information on all enterprises where there are risks of labour conflicts and protests has been systematised.

An algorithm of timely response to the emerging preconditions for complication of the situation among employees has been developed. Monitoring of the emerging situation among employees of SDEs and all their contractors continues. During the year, 63 cases with potential risks of social tension at 55 enterprises were under special control.

With the direct involvement of the Representative Office, 11 strikes were terminated by bringing labour conflicts into the legal framework (setting up conciliation commissions, reaching a compromise between the employer and strikers, etc.) and 52 protests were prevented at an early stage. In order to improve the social situation, continuous control over industrial relations in the contracting organisations of KMG SDEs was organised. As part of this work, 11 inspections and IR-screenings were conducted.

As a result of the actions taken, there was a significant reduction in the number of oil and gas enterprises with medium labour conflict risks (from 20 cases in January 2023 to 4 in December). At the moment, all enterprises of SDEs and contractors are operating in normal mode.

Inspection of contractors of Ozenmunaigas JSC and oilfield service SDEs of JSC NC “KazMunayGas”

On 05 June 2023 in Zhanaozen, a special group of employees of JSC NC “KazMunayGas”, KMG Representative Office in Aktau, Ozenmunaigas JSC, Mangistaumunaigas JSC, Karazhanbasmunai JSC, as well as involved specialists from oilfield service SDEs of Mangistau Region (a total of 60 people) started its work. The purpose of the group is to inspect and analyse the activities of OMG contractors and oilfield service SDEs of KMG.

43 contractors were inspected, including 29 OMG contractors and 14 contractors of the above-mentioned oilfield services SDEs of KMG.

The working group carried out the inspection in two directions:

• inspection of compliance with labour law requirements, inspection of working conditions, sanitary and living conditions, occupational health and safety, as well as conditions of medical care. Particular attention was paid to internal communications between the company’s management and its employees (meetings of CEO with employees, reception of employees to consider personal matters and consideration of employees’ appeals);
• inspection of contractors’ performance of contractual obligations, including inspection of the targeted use of funds allocated under the contract (payment of production bonuses, year-end bonuses, lump-sum bonuses for holidays, health improvement payments for labour leave and provision of guaranteed minimum social package).

The inspections revealed 572 non-compliances. OMG and oilfield service SDEs of KMG were recommended to send instructions to contractors to eliminate the identified non-compliances and violations with deadlines for compliance.

The management of OMG and oilfield service SDEs was instructed to carry out additional inspections, following which appropriate actions will be taken against the above contractors and responsible persons of OMG and oilfield service SDEs of KMG.

In turn, a single checklist was prepared to check labour conditions, occupational health and safety, and medical care conditions.