Aon Remuneration Policy

Aon Australia

2

Table of Contents

1. Purpose 3

2. Authority and Scope 3

3. Remuneration guiding principles 3

4. Remuneration Structure 4

5. Governance 5

6. Accounting for risk and design 6

7. Special events 7

8. Review of Aon’s remuneration policy 7

3

1. Purpose

Aon’s remuneration policy delivers remuneration arrangements that help drive the achievement of

Aon’s strategy, consistent with its stated risk appetite, and support Aon’s desired collaborative

performance culture.

The policy provides a framework for the implementation, assessment and maintenance of Aon’s

remuneration arrangements.

2. Authority and Scope

This remuneration policy covers all Aon employees including employees of Aon subsidiaries. For the

purposes of this policy, remuneration arrangements include measures of performance, the mix of

forms of remuneration (such as fixed and variable components, and cash and equity-related benefits)

and the timing of eligibility to receive payments. All forms of remuneration are captured by this policy,

regardless of where, or from whom, the remuneration is sourced.

3. Remuneration guiding principles

Aon has a set of guiding principles that underpin all remuneration arrangements within Aon, and these

are set out below. Appendix 1 sets out codified practices which collectively contribute to each guiding

principle.

a. Remunerations arrangements should align and contribute to Aon’s key strategic objectives,

business outcomes and desired collaborative performance culture.

b. In a manner relevant to their role, remuneration arrangements should support the

engagement of employees to achieve outstanding performance and bring value to Aon.

c. Remuneration should attract and retain the desired talent within Aon.

d. Remuneration arrangements should align the defined interests of stakeholders: shareholders,

clients and employees.

e. Remuneration should support Aon’s risk management framework and protect the long-term

financial soundness of Aon.

f. Remuneration arrangements should be simple and practical.

g. The remuneration structures should be supported by a governance framework that avoids

conflicts of interest, defines clear accountabilities and ensures that proper checks and

balances are in place.

In practice, while remuneration structures as a whole conform to the guiding principles, there are

instances where trade-offs need to be made (for example, the principle of simplicity may at times

conflict with the desire for remuneration structures tailored for different business activities). Any such

trade-offs are explicitly considered and agreed as part of the approval and governance process.

Aon recognises that individual remuneration arrangements and elements are part of a larger context.

Remuneration is only one part of the overall working environment, and employee behaviour is

influenced by many factors including longer-term career aspirations and governance and risk

management frameworks within which work is performed.

These guiding principles are the basis of Aon’s remuneration policy and form the framework within

which all aspects of remuneration at Aon are managed.

4

4. Remuneration Structure

Remuneration elements

Aon provides a number of remuneration elements to employees. The key elements of remuneration

for most employees are fixed pay and short-term incentive (STI). Some more senior employees may

also receive long-term incentive (LTI) awards.

i) Fixed Pay

All Aon employees receive fixed pay, which includes a cash salary, superannuation and the

opportunity to take advantage of Aon’s employee benefit program offered from time to time. For the

majority of employees, fixed pay is provided as an all-inclusive amount referred to as Total Fixed

Remuneration (TFR), from which compulsory superannuation contributions are deducted. For other

employees, fixed pay comprises a base salary and a separate superannuation amount.

Fixed pay is targeted to the market median for each role. Depending on the key sources of talent for

the role, the selected market may be specific to insurance companies and/or those of a similar size to

Aon. The level of fixed pay varies from the median depending on internal relativities, reliability of the

market data and individual factors including experience, capability and performance. The criticality of

the role to deliver Aon’s strategy can also be a determining factor.

While most employees are on a defined contribution superannuation scheme, some longer standing

employees participate in defined benefit plans.

Benefits including superannuation are designed to appropriately balance the provision of flexibility and

tax-effectiveness to employees, with Aon’s costs of providing and administering the benefits.

ii) Short-term incentives (STI)

Some Aon employees are eligible to be considered for an STI provided they have met the required

behaviour and performance standards. Eligibility is based on seniority and the scope and nature of an

employee’s role.

In the event that both Aon and an employee perform strongly, short-term incentives provide scope to

position an employee’s total remuneration above the median of the external market.

Senior employees with an ability to impact Aon’s financial performance have a component of their STI

deferred; typically for three years and delivered in equity (i.e. rights to Aon plc shares).

Other short-term incentives

Where an employee’s contribution to Aon can be measured objectively and where it is common

market practice to do so, a portion of the employee’s short-term incentive opportunity may be directly

linked to the value created by the employee. Examples are revenue and/or profit sharing for selected

sales roles.

Sales incentives are aligned to the timeframe of revenue-generating activities. Payment under these

plans is subject to thresholds based on the performance required to generate profitable business

outcomes. If the threshold is not met, zero payments result. Where paid more frequently than

annually, sales incentives have provisions to adjust outcomes for prior periods based on annual

performance. Plans may vary by business area to account for their performance focus.

5

Payments under these plans are funded in the businesses and not sourced from the Aon-wide STI

pool.

Further details regarding the appropriate approval and governance mechanisms for the establishment

and administration of other incentive schemes is outlined below under Section 5 Governance.

iii) Long-term incentives (LTI)

Executives who are able to influence long-term shareholder value and role model appropriate

leadership behaviours and/or technical expertise are eligible to be considered for long-term incentive

(LTI) awards. The quantum of the award provided to an executive considers their seniority and

criticality to Aon.

Where possible, LTI plans are share-based (e.g. performance share units or restricted share units),

although this is not always possible in jurisdictions outside of Australia and a cash equivalent scheme

may therefore be applied in these circumstances.

Special remuneration arrangements: one-off payments

One-off payments including sign-on payments, retention awards and other cash or equity-based

payments not included in the remuneration elements discussed above are subject to two-up manager

approval with final approval from the CEO and Director, People and Culture.

Remuneration mix

The mix of remuneration elements for individual Aon employees varies depending on the employee’s

role, level and current market practice.

The remuneration mix for each Aon employee is designed to be market competitive, while providing

the appropriate performance focus for their role. Aon sets fixed pay at an appropriate level in absolute

terms and relative to variable pay to avoid encouraging excessive risk taking.

5. Governance

The CEO, CFO and Director, People and Culture are responsible for the governance of Aon’s

remuneration. They approve:

The annual performance scorecard used to determine the Aon STI pool;

The actual size and distribution of annual STI pools taking into account any significant

unexpected or unintended consequences that occurred throughout the performance year;

Budgets in relation to the annual fixed remuneration review and sales incentive payments;

New sales incentive plans and material amendments to existing sales incentive plans;

Material changes to superannuation; and

Expenditure on LTI plans.

6

Other short-term incentive plans

The implementation of all new tailored incentive plans and material amendments to existing incentive

plans, require the following approval and governance process.

Performance & Reward team approve plan design. This includes establishment of

performance measures, target setting, threshold values and performance outcomes.

The Tailored Incentive Plan Governance Committee is responsible for the approval of all

tailored incentive plans.

New ARS incentive plans require approval from the Global HR Leader.

Plan documentation for all incentive plan arrangements must be provided to the Global

Business Unit Compensation Lead.

Salary Increases

In determining appropriate increases, consideration will be given to three factors; employee

performance, Aon’s financial performance, and the employees current level of remuneration relative to

colleagues working in comparable roles, as well as external markets.

Remuneration is reviewed annually, but not necessarily increased.

With the exception of promotions there should be no changes to remuneration and benefits outside of

the annual remuneration review conducted in Q1 each calendar year. Any proposed salary increases

require the approval of the Business Executive and Director, People & Culture. Changes within ARS

also require approval by the Chief Financial Officer.

6. Accounting for risk and design

Risk management considerations apply in two ways in remuneration: in plan design and in

determining outcomes:

Risk management measures are incorporated in remuneration design and in objectives,

where appropriate. Additionally, in designing new incentive plans analysis is conducted to

ensure the plan will deliver appropriate outcomes in a range of performance scenarios,

incorporating adjustments to reflect the time necessary for the outcomes of business

operations to be reliably measured.

Individual incentive outcomes are reviewed to ensure any ongoing risk in the business

performance is appropriately recognised.

Risk management approaches in plan design may include:

Inclusion of specific objectives in scorecards determining incentive pool funding;

Use of risk-adjusted financial metrics;

Adjustment of the payment period for incentives (i.e. deferral) to allow adjustments in the

event of risk management and/or code of conduct breaches; and

7

Provision to pay reduced or zero incentives if this is necessary to protect the financial

soundness of Aon, to respond to significant unexpected or unintended consequences that

were not foreseen by management, or for the purposes of any other relevant prudential

matter.

7. Special events

In the event of Aon acquiring a business, the remuneration arrangements of the employees of the

acquired business are generally changed to match the remuneration arrangements for the equivalent

Aon employees. This principle is applied flexibly to accommodate other factors such as remuneration

or geographical differences in market practice of remuneration.

8. Review of Aon’s remuneration policy

This remuneration policy will be next reviewed in full by the end of 2016. Changes to the policy may

be made earlier if considered necessary.

Dated: 4 August 2016

Reviewed by: James Henaghan, Senior Performance & Reward Manager

Appendix 1 - Performance & Reward Guiding Principles

Guiding Principle Practices

1. Alignment with Aon’s key strategic objectives

1.1 Performance measures and associated remuneration outcomes should be explicitly linked to short-term and long-term strategic objectives and business imperatives.

1.2 Performance measure should be consistently and meaningfully cascaded through Business Unit strategy and individual goals and objectives.

1.3 Remuneration arrangements should be flexible to adapt to changes in business strategy.

2. Performance Focus 2.1 Different performance levels should have pay outcomes that are materially different. 2.2 The link between performance and remuneration must be understandable for employees. 2.3 Employees should be able to impact their variable pay outcomes. 2.4 Incentive payments should reflect business outcomes and Aon’s capacity to pay.

3. Attraction and retention 3.1 Remuneration should be attractive to prospective and current employees and be market competitive for the specific businesses and geographies in which Aon operates.

3.2 The remuneration mix should be appropriate for the role. 3.3 Total remuneration should take into account internal equity for comparable roles. 3.4 Total remuneration should take into account Aon’s talent and succession planning.

4. Stakeholder alignment 4.1 The remuneration structure and mechanics of remuneration arrangements should be clearly articulated and understandable by internal and relevant external stakeholders.

4.2 Remuneration arrangements should be applied in an equitable, though not necessarily equal, manner and be non-discriminatory. 4.3 Remuneration arrangements should appropriately align the interests of shareholders, clients and employees.

5. Embedded risk management 5.1 Performance and associate remuneration outcomes should reflect material risks. 5.2 Remuneration should support appropriate risk-taking which is aligned to Aon’s risk appetite. 5.3 Remuneration should reflect the time necessary for the outcomes of business activities to be reliably measured

6. Simplicity 6.1 New remuneration plans should only be implemented where existing plans are not effective or cannot be materially improved. 6.2 Remuneration should be practical and feasible to administer either through existing systems and processes or appropriate

additions. 6.3 Remuneration arrangements should be clearly understood by employees.

7. Governance 7.1 Process should be in place to ensure that performance measures, target setting and performance assessment are validated in a manner which recognises potential conflicts of interest.

7.2 Remuneration structures should be compliant with regulatory and legislative requirements. 7.3 Accountabilities and delegations should be clearly documented.