Nokia rewards employees competitively through a global reward framework designed to recognize individual contribution and achievement. Levels of compensation are determined by local labor markets and take into account both individual and company performance.

In 2007, 37% of those participating in our annual employee survey felt their pay was competitive. This is a slight increase from 2006 but it is 5% below the global external benchmark for this question across a range of industries from high tech to retail and banking.

Incentives

Our reward programs – including bonuses – recognize performance based on individual, team and company results.

Some employees raised concerns about the fairness of our bonus system in 2007. In response, we reviewed the way bonuses are structured to ensure transparency and consistency across the company. We held several focus groups with managers, human resources experts and employees, and reviewed the incentives offered by other companies.

We introduced changes to our incentive plans in the second half of 2007. The new plans are simpler, more consistent and will deliver equal or higher payouts if target performance or above is achieved. The key changes were communicated to employees through their managers, by email and in internal newsletters with supporting information on our intranet.

A wide number of employees are eligible to join our equity programs, based on rewarding performance and retaining top employees. Our broad-based equity compensation programs include stock options and performance shares. Both are linked to the company’s performance over a number of years.

Incentive highlights in 2007 include:

• Cash incentive/bonus plans – 100% of professional employees participate in short-term incentive, R&D incentive, sales incentive production or short term bonus plans.
• In August 2007, employee participants in the Nokia Connecting People Bonus plan were rewarded with a partial payout based on business performance over the first half of 2007. This plan has now been replaced to align with changes to other employee incentive plans.
• A new Short Term Bonus Plan was introduced in the second half of 2007 for employees working in Production factories, Flagship stores and employees currently not eligible for any other incentives.
• An interim payout under our Performance Share Plan was delivered to participants in May 2007.

We communicate with employees about the effect of business results on their incentives after each quarterly announcement, through articles and video messages on our intranet news channel, the News Hub. We also communicate through quarterly letters, blogs, webcasts and face-to-face meetings. In addition, information is available on the Know Your Business section of our intranet.