UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant ☒

Filed by a Party other than the Registrant    ☐

Check the appropriate box:

Kelly Services, Inc.

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

LETTER FROM THE CHAIRMAN OF THE BOARD

April 6, 2020

Dear Stockholders:

2019 saw a leadership transition for our Company and continued progress in corporate governance.

On October 1, 2019, Peter Quigley became our new President and CEO and joined our Board of Directors. George Corona stepped down as President and CEO for his planned retirement on June 30, 2020. Peter was selected following an extensive succession process conducted by the Board, involving internal and external candidates. Prior to becoming President and CEO, Peter spent 17 years in varied and demanding leadership roles at Kelly. With the support of the Board, Peter is leading the Company’s strategic transformation into a specialty talent company.

On behalf of the Board, I want to express our gratitude to George for his exceptional leadership. He has helped Kelly become a more focused company, make solid investments in technology and the future of work, and stay aligned with our Noble Purpose of connecting people to work in ways that enrich their lives. We are grateful for his 25 years of service to Kelly and pleased that George will remain on our Board and will be contributing his experience to Peter’s transition.

I would also like to take this opportunity to thank Takao Wada for his distinguished service on the Board. Mr. Wada served as the designated representative of Persol Holdings, LLC, Kelly’s strategic partner in the Asia-Pacific region, and is not standing for re-election.

The Board is committed to sound corporate governance as a means of enhancing long-term stockholder value. We have a majority independent Board and fully independent Audit and Compensation Committees. Following our Annual Meeting, when we will make new committee assignments, our Corporate Governance and Nominating Committee will be fully independent. That will bring us to the important milestone of satisfying all the Nasdaq independence requirements for board and board committees that are applicable to non-controlled companies.

As of this writing, like most businesses throughout the world, we are confronting serious challenges raised by COVID – 19 (“Coronavirus”) for our Company, employees, and business partners. In response, Kelly implemented its emergency management procedures under which a cross-functional Emergency Management Team was assembled to coordinate crisis management for the organization, including containment measures, policies, communications, and resources. We have implemented measures designed to protect the health and safety of Kelly employees, including initiating travel restrictions, barring in-person attendance at conferences and large events, and restricting nonessential visitors from our buildings. Kelly’s adoption of information technology systems and policies that enable remote work are proving to be extremely beneficial during this time, and Kelly workers are able to perform nearly all essential functions remotely. When possible, Kelly is also working with its customers to implement remote work plans for temporary employees. Kelly will continue to adapt its approach in light of government actions, best practices, and the recommendations of public health officials. As we get closer to the date of the Annual Meeting, we will determine whether it is advisable to hold our Annual Meeting as a virtual meeting. Whatever format it ultimately takes, I hope you will be able to attend our Annual Meeting on May 6, 2020.

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

April 6, 2020

Dear fellow Stockholders:

We are pleased to invite you to join our Board, senior leadership, and other associates of Kelly Services, Inc., a Delaware corporation (the “Company”), for the Annual Meeting of Stockholders, to be held at the offices of the Company, 999 West Big Beaver Road, Troy, Michigan 48084-4716, on Wednesday, May 6, 2020 at 11:00 a.m., Eastern Daylight Time.

As a precaution regarding the Coronavirus or COVID-19, we may hold our annual meeting over the web in a virtual meeting format instead of holding the meeting in Michigan. If we take this step, we would publicly announce a determination to hold a Virtual Annual Meeting in a press release available at kellyservices.com as soon as practicable before the meeting. The press release would include instructions as well as a webcast link from which to access the 2020 Annual Meeting of Stockholders on the above date and time, via live audio webcast, but only if the meeting is not held in Michigan.

At the Annual Meeting, you will be asked to consider the following proposals:

If you were a holder of record of the Company’s Class B Common Stock at the close of business on the Record Date, March 16, 2020, you are entitled to vote at the Annual Meeting.

Please promptly submit your vote by internet, telephone, or by signing, dating, and returning the enclosed proxy card or voting instruction form in the postage-paid envelope provided so that your shares will be represented and voted at the meeting.

Thank you for your interest in Kelly.

The following materials, also included with the Notice of Annual Meeting of Stockholders, are available for view on the Internet:

To view the Proxy Statement or Annual Report visit: www.envisionreports.com/kelyb.

Please refer to the enclosed Proxy Card and Proxy Statement for information on voting options:

Internet — Scan QR Code — Telephone — Mail

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Table of Contents

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                         Proxy Summary

PROXY SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. Please refer to the complete Proxy Statement and Kelly’s 2019 Annual Report before you vote.

MEETING AGENDA

HOW TO VOTE

Internet at www.envisionreports.com/kelyb		QR code - Scan and vote with your mobile device		Calling 1-800-652-VOTE  (8683) within the U.S., U.S. territories & Canada on a touch tone telephone		Mail - Return the signed proxy card

Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Central Daylight Time, on May 5, 2020. If you vote by mail, your proxy card must be received before the Annual Meeting.

Beneficial owners, who own shares through a bank, brokerage firm, or other financial institution, can vote by returning the voting instruction form, or by following the instructions for voting via telephone or the Internet, provided by the bank, broker, or other organization. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all your shares.

If you are a stockholder of record or a beneficial owner who has a legal proxy to vote the shares, you may choose to vote in person at the Annual Meeting. If you plan to vote your shares at the meeting, please promptly request a legal proxy from your broker, as you will need to bring this with you to the meeting in order to vote your shares. Even if you plan to attend our Annual Meeting in person, please cast your vote as soon as possible.

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                         Proxy Summary

DIRECTOR NOMINEES

The following table provides summary information about each director nominee. Each director is elected annually by a plurality vote.

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                         Proxy Summary

CORPORATE GOVERNANCE HIGHLIGHTS

Kelly is committed to sound corporate governance as a means of enhancing long-term stockholder value. Highlights of our governance practices are described below.

73 YEARS OF INDUSTRY LEADERSHIP

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                         Proxy Summary

Corporate Sustainability Strategy

We consider sustainability to be a guiding principle in strengthening the relationship with our global workforce, suppliers, and customers. As a leading provider of global workforce solutions, we connect people with employment opportunities and make a difference in the communities in which we live and work. Through our programs and initiatives, we seek to contribute to improving the quality of life of our employees, their families, as well as the communities in which we operate. Given the worldwide span of our workers, clients, suppliers, and partners, we recognize the global reach of both our business practices and our public accountability.

Since 2017, we embarked on a transformation from Corporate Social Responsibility initiatives, toward a long-term Corporate Sustainability Strategy aligned to our business core which contributes to the Sustainable Development Goals.

This new sustainability approach, rather than being philanthropic, is strategic to our business values. It is based on the concept of social investment, which, instead of aiding on isolated occasions, ensures the creation of future development capacities. We aim to guide all our subsidiaries and collaborators in the planning, management, and implementation of sustainable strategic approaches that create measured and impactful shared value to all our stakeholders.

Our Corporate Sustainability Strategy is defined as an integrated decision-making strategy that provides comprehensive guidelines for implementing internal actions toward these ends. These guidelines provide procedures and tools to ensure the applicability of the strategy on a worldwide basis–guaranteeing the same standards, metrics, and objectives for all our operations.

This strategy has been developed with consideration given to the perceptions of our stakeholders, as well as its impact on business operations. In early 2018, we conducted a material assessment that helped us define the policies and guidelines of our Corporate Sustainability Strategy.

Permanent monitoring of our sustainable performance is conducted on an annual basis by means of an interdisciplinary perspective assessment involving cross-functional areas within the company. Progress in our Corporate Sustainability Strategy are reported on an annual basis through the Global Reporting Initiative Standard (GRI), and Communications of Progress (following the UN Global Compact), which we support since February 2019.

Sustainability is an integral part of our company’s strategy and operations. To learn more about our ESG program, please view our website at https://www.kellyservices.com/global/about-us/corporate-sustainability/corporate-sustainability-program/.

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                         Proxy Summary

Assessments, Recognition & Awards

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                         Proxy Summary

FULL YEAR 2019 FINANCIAL SUMMARY

(As Reported)

FULL YEAR 2019 FINANCIAL SUMMARY

(Excluding Gain/Loss on investment in Persol Holdings, Acquisitions, Asset Impairment Charge, Restructuring, and Gain on Sale of Assets)

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                         Proxy Summary

EXECUTIVE COMPENSATION HIGHLIGHTS

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Proposal 1: Election of Directors

PROPOSAL 1 – ELECTION OF DIRECTORS

The Board has nominated nine individuals for election as directors at the Annual Meeting, each to serve for one year and until his or her successor is elected and qualified. All of these individuals are currently serving on the Board. The other current director, Mr. Takao Wada, is the designated representative of our joint venture partner Persol Holdings Co., Ltd. (“Persol”). Mr. Wada is not standing for re-election and, following the Annual Meeting, Persol will not have a representative on the Board.

Directors will be elected by a plurality of the votes cast by holders of Class B Common Stock who are present in person, or represented by proxy, and entitled to vote at the Annual Meeting. Our controlling stockholder has indicated its support and intention to vote for each of the director nominees.

We do not contemplate that any of the nominees will be unavailable to serve at the time of the Annual Meeting; in that event, however, the persons named in the enclosed form of proxy may vote for the election of a substitute selected by the Board or the Board may reduce its size.

Director Independence

On February 12, 2020, our Board affirmatively determined that directors Gerald S. Adolph, Robert S. Cubbin, Jane E. Dutton, Terrence B. Larkin, Leslie A. Murphy, and Donald R. Parfet, representing a majority of the Board, are independent. The Board’s guidelines for director independence conform to the listing standards of the Nasdaq Global Market (“Nasdaq”) on which the Company’s common stock is listed.

Board Nominees

The Corporate Governance and Nominating Committee is responsible for identifying and recommending to the Board qualified candidates for Board membership with the goal of building a Board that is effective, collegial, diverse, and responsive to the current and anticipated needs of the Company. The Committee considers the following criteria: (i) ethics, character, and judgment; (ii) business and other experience, expertise, skills, and knowledge relevant to the Company’s business and strategy; (iii) objectivity and independence of thought; (iv) diversity of background, experience, and personal characteristics such as gender, race, ethnicity, sexual orientation, and age; and (v) the interplay of the candidate’s qualities with those of other members of the Board. In determining whether to recommend a director for re-nomination, the Committee also considers the director’s recent contributions and potential for continuing contributions to the work of the Board. The Board has not adopted a policy whereby stockholders may recommend nominees to the Board because of the Company’s status as a controlled company.

Each of our director nominees has been recommended for election by our Corporate Governance and Nominating Committee and nominated by our Board. Together, they bring to our Board broad diversity in terms of experience, skills, and personal attributes. The Board believes that this diversity strengthens the Board’s ability to carry out its oversight role on behalf of stockholders. While we do not have a formal diversity policy, the Board will seek to build upon its diversity in connection with future refreshment.

The following graphics highlight the personal diversity and breadth of skills, knowledge, and experience that are represented on the Board. A particular director may possess other skills, knowledge, or experience in addition to those noted below.

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Proposal 1: Election of Directors

BOARD DIVERSITY

EXPERIENCE AND QUALIFICATIONS

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Proposal 1: Election of Directors

Biographical Information About Director Nominees

		Donald R. Parfet Age: 67 Director since: 2004 Chairman of the Board				Peter W. Quigley Age: 58 Director since: 2019   Chief Executive Officer
Board Committees:   •  None				Board Committees:   •  None
Principal Occupation and Directorships:   •  Managing Director, Apjohn Group, LLC (2001 - present)   •  General Partner, Apjohn Ventures Fund (2003 - present)   •  General Partner, Apjohn Ventures Annex Fund (2010 - present)   •  Director, Rockwell Automation, Inc. (2008 - present)   •  Director, MASCO Corporation (2012 - present)   •  Director, Sierra Oncology Inc. (2015 - 2019)				Principal Occupation and Directorships:   •  President and Chief Executive Officer, Kelly Services, Inc. (2019 - present)   •  Executive Vice President, President of Global Staffing and General Manager of IT, Global Service, and Global Business Services, Kelly Services, Inc. (2017 - 2019)   •  Senior Vice President, General Counsel, Chief Administrative Officer and Assistant Secretary, Kelly Services, Inc. (2015 - 2017)
Education:   •  University of Michigan, MBA, Finance   •  University of Arizona, BA, Economics				Education:   •  National Law Center at George Washington University, JD   •  University of Michigan, BA
Don was appointed Chairman of the Board in 2018. Prior to being appointed to the Chairman role, he had served as the Board’s Lead Director since 2012. Don brings extensive financial and operating experience to the Board as an executive with responsibilities for numerous global businesses. He currently leads a business development company and a venture capital firm focused on the development of emerging medicines. He also serves as a director of two large publicly held companies and is a director and Trustee of a number of charitable and civic organizations. Don brings to the Board global operating experience, strong financial background, and proven leadership capabilities.				Peter was appointed President and Chief Executive Officer of Kelly in October 2019. Peter has 17 years of experience in a variety of roles at Kelly and has served as an officer of the Company since 2004. Prior to joining Kelly, Peter held an array of roles at Lucent Technologies and AT&T Corporation. He earned a Juris Doctorate (J.D.) from the National Law Center at George Washington University and a bachelor’s degree from the University of Michigan. He is a member of the State Bar of Michigan and the District of Columbia Bar. Peter also serves on American Staffing Association’s and the Detroit Regional Chamber’s Board of Directors.

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                           Proposal 1: Election of Directors

		Carol M. Adderley Age: 60 Director since: 2010				Gerald S. Adolph Age: 66 Director since: 2018
Board Committees:   •  Governance and Nominating				Board Committees:   •  Audit   •  Compensation   •  Governance and Nominating
Principal Occupation and Directorships:   •  Writer and Researcher in the Humanities				Principal Occupation and Directorships:   •  Director and Co-Chair, NAACP Legal Defense and Education Fund (1998 - present)   •  Director, Cintas Corporation (2006 - present)   •  Trustee, Cardinal Spellman High School Board (2010 - present)   •  Senior Partner and other executive positions, Booz & Co. (1981 - 2016)
Education:   •  University of Iowa, MA, English Literature   •  University of Chicago, AM, General Studies in Humanities, Literature and Social Change   •  University of Western Ontario, BA (Honors), English and Philosophy				Education:   •  Harvard Business School, MBS   •  Massachusetts Institute of Technology, MS, Chemical Engineering   •  Massachusetts Institute of Technology, BS, Management Science (Concentration in Organizational Psychology)   •  Massachusetts Institute of Technology, BS, Chemical Engineering
Carol is the granddaughter of William R. Kelly, the Company’s founder, and the daughter of Terence E. Adderley, who served for many years as Chief Executive Officer and as Chairman of the Board. Carol holds advanced degrees in the humanities and is a published author.				Gerald, who joined our Board in March 2018, has over 35 years of experience in growth strategy, mergers and acquisitions, and technology-driven industry changes. Gerald also has governance experience through his past service on the board of Booz & Co. and current service on the boards of Cintas Corp., where he chairs the compensation committee, and the NAACP Legal Defense and Education Fund, which he co-chairs.

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                         Proposal 1: Election of Directors

		George S. Corona Age: 61 Director since: 2017				Robert S. Cubbin Age: 62 Director since: 2014
Board Committees:   •  None				Board Committees:   •  Audit   •  Compensation (Chair)   •  Governance and Nominating
Principal Occupation and Directorships:   •  President and Chief Executive Officer, Kelly Services, Inc. (2017 - 2019)   •  Executive Vice President and Chief Operating Officer, Kelly Services, Inc. (2009 - 2017)				Principal Occupation and Directorships:   •  Director, Huntington Bancshares Incorporated (2017 - present)   •  Director, First Merit Corporation (2013 - 2017)   •  President and Chief Executive Officer, Meadowbrook Insurance Group, Inc. (2002 - 2016)
Education:   •  Oakland University, MBA   •  Wayne State University, BSBA				Education:   •  Detroit College of Law, JD   •  Wayne State University, BA, Psychology
George served as President and Chief Executive Officer of Kelly from May 2017 until his retirement in September 2019. George had more than 20 years of experience in a variety of executive roles with Kelly, including eight years as Executive Vice President and Chief Operating Officer. Prior to joining Kelly in 1994, he held management roles at Digital Equipment Professional Services Group and Burroughs Corporation. George also serves on the boards of several not-for-profit organizations.				Bob is an attorney with 31 years of experience in insurance law. In 2016, he retired as President and Chief Executive Officer of an insurance company. Bob currently serves as a director of one other publicly held company. In addition to his leadership experience, he brings to the Board expertise in the areas of legal, insurance, management, accounting, actuarial, investment, underwriting, reinsurance, and claims experience.

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                         Proposal 1: Election of Directors

		Jane E. Dutton Age: 67 Director since: 2004				Terrence B. Larkin Age: 65 Director since: 2010
Board Committees:   •  Compensation   •  Governance and Nominating (Chair)				Board Committees:   •  Audit   •  Compensation
Principal Occupation and Directorships:   •  Robert L. Kahn Distinguished University Professor Emeritus of Business Administration and Psychology, The University of Michigan Business School (2017 - present)   •  Robert L. Kahn Distinguished University Professor of Business Administration and Psychology, The University of Michigan Business School (2007 - 2017)				Principal Occupation and Directorships:   •  Executive Vice President, Business Development, General Counsel and Corporate Secretary, Lear Corporation (2008 - 2020)
Education:   •  Northwestern University, Ph.D. and MS, Organizational Behavior   •  Colby College, BA Sociology				Education:   •  Wayne State University Law School, JD cum laude   •  Michigan State University, BA (High Honors), Finance
Jane is an expert in the field of organizational behavior and has researched and published numerous works on best practices related to engagement, commitment, and productivity of employees. Her understanding of factors contributing to organizational excellence provides the Board with a vital perspective on the Company’s transformation into a specialty talent company.				Terry is an attorney with 28 years of experience in a business law practice. He retired in January 2020 as a member of the senior management team of a global manufacturing company with responsibility for legal affairs, internal audit, and global business development for mergers, acquisitions, and joint ventures. Terry currently serves on the board of one not-for-profit organization. He brings to the Board a valuable combination of complex problem-solving skills, governance expertise, and global experience.

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                         Proposal 1: Election of Directors

		Leslie A. Murphy Age: 68 Director since: 2008
Board Committees:   •  Audit (Chair)   •  Compensation
Principal Occupation and Directorships:   •  President and CEO, Murphy Consulting, Inc. (2008 - present)   •  Certified Public Accountant   •  Member of AICPA’s Governing Council (2000 - present)   •  Member of NACD Advisory Councils on Audit Committee Issues and Risk Oversight (2012 - present)   •  Director, Detroit Legal News Company (2012 - present)
Education:   •  University of Michigan, BBA, Accounting
Leslie is a certified public accountant, former chair of the American Institute of Certified Public Accountants, and former Group Managing Partner of Plante & Moran, LLP, a national accounting firm. The Board has determined that Leslie qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations and has the leadership skills to chair the Audit Committee. She brings to the Board analytical capability, understanding of the economics and strategic elements of business, and expertise in enterprise risk management.

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                         Corporate Governance

CORPORATE GOVERNANCE

Compliance with Nasdaq Independence Standards for Non-Controlled Companies

Nasdaq, on which the Company’s common stock is listed, has established exemptions from its governance requirements for “controlled companies,” defined as companies in which a single person, entity, or group holds 50% of the voting power for the election of its directors. The Company is a “controlled company” by virtue of the fact that the Terence E. Adderley Revocable Trust K (“Trust K”), discussed below, has the power to vote approximately 91.6% of the Company’s outstanding shares of Class B Common Stock.

In keeping with the Company’s historic recognition of the importance of having a majority of independent directors, the Company has elected to comply voluntarily with all the Nasdaq listing standards that otherwise do not apply to controlled companies. Thus, a majority of the Board are independent directors, all members of the Compensation Committee are independent directors and all members of the Audit Committee are independent directors (which is a Nasdaq requirement for all listed companies). Commencing with the Annual Meeting of the Board to be held on May 6, 2020, when committee assignments will be made, all members of the Corporate Governance and Nominating Committee will be independent directors and the Company will fully satisfy the Nasdaq independence standards for boards and board committees of non-controlled companies.

Prior to his death in October 2018, Mr. Adderley was the trustee of Trust K. Upon his death, Trust K became irrevocable and, in accordance with the provisions of the trust, Andrew H. Curoe, David M. Hempstead, and William U. Parfet were appointed as successor trustees (the “co-trustees”). The co-trustees are required to act by a majority vote, in voting and making investment decisions with respect to the Class B Common Stock held by Trust K.

William U. Parfet, a co-trustee, is the brother of Donald R. Parfet, Chairman of the Board. In determining that Donald R. Parfet is an independent director, the Board considered, among other things, that Donald R. Parfet and William U. Parfet are financially independent of one another, that the co-trustees are required to act by majority vote and that none of the co-trustees serves as an officer or director of the Company or has any personal financial interest in Trust K that could benefit from actions taken by the Board.

Board Leadership and Governance Structure

The Board is responsible for establishing and maintaining the most effective leadership structure for the Company. At the present time, the Board has determined that the roles of the Chairman of the Board and the Chief Executive Officer should be separate, with the Chairman an independent director, because that structure affords independent Board leadership and allows the Chief Executive Officer to concentrate on the Company’s business. Donald R. Parfet serves as Chairman of the Board and Peter W. Quigley serves as Chief Executive Officer.

The Chairman of the Board’s duties include consulting with our Chief Executive Officer, presiding over meetings of the Board and, together with our Chief Executive Officer, presiding over meetings of stockholders. The Chairman of the Board’s duties also include serving as liaison among the Chief Executive Officer and the independent directors, establishing the schedule for Board meetings (in consultation with the Chief Executive Officer), developing and approving agendas for Board meetings, approving the information sent to the Board for meetings, establishing the schedule and agendas for and presiding over meetings of the independent directors in executive session, providing feedback to the Chief Executive Officer on those executive sessions, and facilitating discussions among independent directors on key issues outside of Board meetings.

In the event that the Chairman of the Board is not an independent director, the Company’s Corporate Governance Principles provide that the independent directors will elect one of their number to serve as Lead Director and fulfill many of the Chairman of the Board’s current responsibilities.

The Chief Executive Officer is responsible for managing the business and affairs of the Company, subject to the oversight of the Board. The Chief Executive Officer’s duties include leading the management team, representing the Company externally, consulting with the Chairman of the Board about developments in the Company, and communicating with all directors about key issues outside of Board meetings.

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Corporate Governance

Committees of the Board

The Board has established three standing committees: an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee. Each committee functions under a written charter adopted by the Board, which is available on the Company’s website at kellyservices.com or to any stockholder who requests a copy. The current members, responsibilities, and the number of meetings each of these committees held in 2019 are shown below.

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Corporate Governance

Risk Governance and Oversight

While management is responsible for managing risk, one of the important functions of the Board and its committees is oversight of risk management. This includes consideration of strategic issues and risks to the Company as well as management’s actions to address and mitigate those risks. Risk is inherent in business, and the Board’s oversight, assessment, and decisions regarding risks occur in conjunction with the other activities of the Board and its committees.

Risk Governance and Oversight Responsibilities

Board of Directors

Oversees consideration of strategic issues and risks to the Company as well as management’s actions to address and mitigate those risks. The Board is kept apprised of its committees’ risk oversight activities through reports from the committee chairs to the full Board presented at regular Board meetings. Focuses on risk management strategy and risks of greatest significance, and seeks to ensure that risks assumed by the Company are consistent with the Company’s risk tolerance and risk appetite. Risk oversight is also addressed as part of the full Board’s regular oversight of strategic planning.

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                         Corporate Governance

Management

Management assesses and manages critical risks, including the execution of the Company’s Enterprise Risk Management (“ERM”) program. The Company’s risk-related departments and functions are under the direction of the Vice President and Chief Risk, Compliance, and Privacy Officer (“Chief Risk Officer”). With respect to the risk assessment of the Company’s compensation programs, management is responsible for the framework and approach as outlined below under, “Risk Assessment of Compensation Programs.”

Enterprise Risk Management (“ERM”) Program

The Company’s ERM program serves as the primary means of identifying and managing the Company’s key risks. The Company’s ERM team has, among other activities, performed assessments of risks to the Company, participated in the development and execution of mitigation programs for critical risks, facilitated the establishment of a corporate risk appetite and tolerance statement, inclusive of an oversight and monitoring mechanism, established a privacy governance function, and assisted in the integration of risk concepts within the Company’s strategic planning process.

The ERM team reports its findings to the Audit Committee on a quarterly basis, providing both written reports and periodic in-person presentations. Its current activities remain focused on mitigation and oversight of specific risk exposures, analysis of the breadth and effectiveness of existing risk management practices, and maturation of measurement and monitoring practices concerning high-priority strategic and operational risks. Current areas of particular emphasis include cyber security, data privacy, wage-hour risk management, and improvements to the Company’s compliance governance and incident reporting practices. The Company’s Information Technology and Internal Audit groups provide regular quarterly updates to the Audit Committee with respect to the Company’s proactive approach to cyber security. Controls are reviewed for operational effectiveness and to provide reasonable assurance that: business risk is managed and assets are safeguarded; security of information, processing infrastructure, and applications are maintained; and all risks are mitigated to the extent practicable.

In addition to the reports submitted quarterly by the Company’s Chief Risk Officer, the Vice President of Internal Audit independently assesses the Company’s risk management process and separately reports on the effectiveness of the Company’s risk identification, prioritization, and mitigation processes to the Audit Committee.

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                         Corporate Governance

Risk Assessment of Employee Compensation Programs

Annually, at its February meeting, the Compensation Committee reviews management’s Compensation Program Risk Assessment Report. The report is prepared by the Company’s Executive Compensation and Human Resources groups and is reviewed by the Company’s Chief Risk Officer. The Company’s Executive Compensation Program Risk Assessment Framework is reviewed and updated as needed to ensure a robust and comprehensive assessment process. In addition, the Board’s independent compensation consultant reviewed the assessment prepared for the executive compensation section of the report.

The Company’s Executive Compensation Program Risk Assessment

Framework takes into consideration the following guiding factors:

To assess the risk of employee compensation programs below the executive level, the Company’s Human Resources group has implemented a Governance Committee to review and approve plan design and address any significant issues that arise. The Governance Committee utilizes its Global Incentive Plan Design and Risk Mitigation Framework to consider links to strategy and any risks associated with the design of each incentive plan. The risks associated with each of the following elements of the design and implementation of an incentive plan are considered, as well as the steps in place to mitigate risk and ensure alignment with the Company’s strategic plan:

After due consideration of management’s 2019 Compensation Program Risk Assessment Report, the Compensation Committee concluded that the Company’s compensation programs do not create a reasonable likelihood of a material adverse effect on the Company.

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                         Corporate Governance

Director Attendance

Directors are expected to attend the Annual Meeting of the Stockholders, all Board meetings, and all meetings of the committees on which they individually serve. The Board held nine meetings during 2019. All directors then in office attended the 2019 Annual Meeting of Stockholders. Director attendance averaged 96% of the aggregate number of meetings of the Board of Directors and the committees on which they served during 2019. Mr. Wada’s attendance averaged 86% of the aggregate number of meeting of the Board of Directors on which he served during 2019. The independent directors met in executive sessions at which only they were present at least six times during 2019.

Size of the Board

Under the Company’s Amended and Restated Bylaws (the “Bylaws”), the number of directors constituting the Board may be fixed by the Board within the range of five to eleven directors. The size of the Board should not exceed a number that, as determined by the Board, will permit it to function efficiently in discharging its duties.

Director Tenure

The Board does not have term or age limits. The Board believes that the perceived value of such limits is outweighed by the contributions of directors who have been able to develop, over a period of time, increasing insight into the Company’s operations and strategic direction and, therefore, provide an increasing contribution to the effectiveness of the Board as a whole.

Director Service on Outside Public Company Boards

While there is no specified limit on the number of other public company boards on which a director may serve, the number of board memberships is a consideration, along with any other time commitments a director or nominee may have, in determining his or her ability to serve effectively. Directors must be willing and able to devote sufficient time to carrying out their duties and responsibilities effectively and have an intention to serve an appropriate length of time in order to make a meaningful contribution to the Board and the Company. A director should engage in discussion with the Chair of the Corporate Governance and Nominating Committee prior to accepting an invitation to serve on an additional public company board or accepting an invitation to chair a committee of a public company board on which he or she currently serves.

Director Orientation and Continuing Education

Management, working with the Corporate Governance and Nominating Committee, provides an orientation program for new directors. The program addresses the Company’s business, history, vision, strategic direction, competitive landscape, core values, ethics, corporate governance practices, financial matters, key policies, and senior leadership. The program is conducted by means of, as appropriate, written materials, briefings by the senior management, and visits to Company facilities. Directors are also encouraged to participate in continuing director education programs that include presentations on business, financial, accounting, legal, and other subjects relevant to the Company’s business. Reasonable costs and expenses incurred for continuing education are reimbursed by the Company.

Board and Committee Evaluation

The Corporate Governance and Nominating Committee organizes and oversees an annual evaluation by the Board and its committees of their performance. The evaluation is intended to facilitate an examination and discussion by the entire Board and each Committee of its effectiveness in fulfilling its charter requirements and other responsibilities, its performance as measured against the Company’s Corporate Governance Principles, and areas for improvement. From time to time the evaluation may also include individual director assessments.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all directors, officers, and employees to help them recognize and deal with ethical issues, deter wrongdoing, provide mechanisms to report any concerns, promote honest and ethical conduct, provide full, fair and timely disclosure, comply with applicable law and regulations, and help foster a culture of honesty and accountability. The Code of Conduct addresses conflicts of interest; anti-bribery/anti-corruption; insider trading; corporate opportunities; confidentiality and privacy; external communications; protection and proper use of assets; fair dealing; contract management; acceptable behavior in the workplace; corporate sustainability; compliance with laws, rules and regulations; risk tolerance; anti-human trafficking and slavery; seeking advice and reporting concerns; outside activities; political contributions; public company reporting requirements; and other policies. The Code of Conduct includes an enforcement mechanism.

The full text of the Code of Conduct is posted on the Company’s website at kellyservices.com. This information is available in print to any stockholder who requests it from the Company’s Investor Relations department. The Company will disclose future amendments to the Code of Conduct for its directors and executive officers on its website or by filing a current report on Form 8-K within four business days following the date of amendment, or such earlier period as may be prescribed by Nasdaq or the SEC.

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                         Corporate Governance

Related Person Transactions and Certain Relationships

Pursuant to the Company’s Code of Conduct, any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company must be disclosed immediately to the Vice President of Internal Audit or to the General Counsel. In addition, directors and executive officers are required to complete an annual questionnaire that solicits information regarding any transactions or relationships between themselves or their immediate family members and the Company of the types described in Item 404(a) of SEC Regulation S-K (“Related Party Transactions”). Directors and executive officers must seek a determination and obtain prior authorization or approval of any potential conflict of interest (including any Related Party Transaction) from the independent Audit Committee. The Audit Committee, pursuant to its charter, is tasked, among other things, with the responsibility to review Related Party Transactions and other conflicts of interest involving directors and executive and senior officers. The Company maintains a formal written policy addressing the reporting, review, and approval or ratification of transactions with related persons.

Mr. Wada, a director of the Company whose term expires as of the date of the Company’s 2020 Annual Meeting, served as the designated representative of Persol, which owns 4.4% of the Company’s Class A Common Stock, and with which the Company has a strategic alliance, as described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019. Mr. Wada received no compensation for his service as a director.

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                         Director Compensation

DIRECTOR COMPENSATION

Our approach to director compensation is to appropriately compensate our non-employee directors for the time, expertise, and effort required to serve as a director of a large, complex company and to align the interests of directors with those of stockholders. Compensation levels for our non-employee directors are periodically reviewed for market competitiveness. Compensation payments are made after the non-employee directors are elected by stockholders at the Annual Meeting. Non-employee directors who begin their Board or committee chair service other than at the Annual Meeting receive a prorated amount of annual compensation.

Director Compensation Design

The Compensation Committee typically reviews non-employee director compensation in alternating years. In 2018, the Compensation Committee engaged its independent compensation consultant, Pay Governance, to evaluate its non-employee director compensation. Pay Governance conducted a comprehensive review of the most recent proxy filings of the Company’s peer group and general industry to assess the competitiveness of the Company’s non-employee director compensation. Based on the results of the review, the Committee approved an increase in the value of the equity portion of the annual retainer in 2018. No changes were made to non-employee director compensation in 2019. The compensation of our non-employee directors will next be reviewed in 2020, with the assistance of Pay Governance. The following table illustrates our 2019 non-employee director compensation:

Under the Company’s amended and restated Equity Incentive Plan (“EIP”), the Board of Directors is required to periodically determine the percentage of the base retainer that will be issued to non-employee directors in shares of Class A Common Stock. The Compensation Committee and Board of Directors have approved fixing the portion of the annual base retainer that is paid in cash at $100,000, and the portion paid in equity at $110,000 (cash portion of $150,000 and equity portion of $160,000 for the Chairman of the Board).

Stock Ownership Requirements

Non-employee directors are subject to a stock ownership requirement that is a minimum fair market value of four times the value of the cash portion of the annual retainer (which currently equates to $400,000).

Non-Employee Directors Deferred Compensation Plan

The Company has established the Non-Employee Directors Deferred Compensation Plan (“DDCP”), which provides non-employee directors with the opportunity to defer all or a portion of all fees payable to them, pursuant to a valid deferral election. The DDCP is a non-qualified plan that allows for the deferral of all or a portion of annual cash payments to a notional account with investment fund choices that mirror those provided to participants in the Company’s Management Retirement Plan (“MRP”). In addition to those fund choices the Plan also includes the option to defer annual cash payments into Company common stock units. Non-employee directors may also elect to defer all or a portion of their annual stock retainer into Company common stock units. Participants may elect to receive distributions from their DDCP account at the time they cease to be a director of the Company or at a future date that is between one and ten years following the date they cease to be a director of the Company. Non-employee directors can elect to have distributions from the DDCP made in either a lump sum or in annual installment payments made over a two-to-ten-year period.

The following table sets forth the compensation paid during 2019 to the Company’s non-employee directors. Mr. Quigley received no compensation for his services as a director in 2019, for the period of time he served as our President and Chief Executive Officer. Mr. Quigley’s compensation as President and Chief Executive Officer is disclosed in the Compensation Discussion & Analysis section of this Proxy Statement.

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                         Director Compensation

2019 Director Compensation    

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                         Beneficial Ownership of Shares

BENEFICIAL OWNERSHIP OF SHARES

The following table sets forth, as of March 16, 2020, (i) the beneficial ownership of the Company’s Class B Common Stock by each person known by the Company to own beneficially more than 5% of the Class B Common Stock, and (ii) the beneficial ownership of the Company’s Class A and Class B Common Stock by (a) each director (each of whom, other than Mr. Wada, is a nominee for election as a director at the Annual Meeting), (b) each of the named executive officers, and (c) all directors and executive officers as a group.

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                         Beneficial Ownership of Shares

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires the Company’s directors and certain officers, as well as persons who beneficially own more than 10% of the outstanding shares of common stock, to file reports regarding their initial stock ownership and subsequent changes to their ownership with the SEC.

Based solely upon a review of filings for fiscal year 2019 with the SEC and related written representations that no other reports were required, we believe that all Section 16(a) reports were filed on a timely basis, except a Form 4 for Ms. Adderley due April 5, 2019, which was filed on February 18, 2020 to report her sale of 5,000 shares of Class A Common Stock on April 3, 2019.

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                         Proposal 2 – Advisory Vote to Approve the Company’s Executive Compensation

PROPOSAL 2 – ADVISORY VOTE TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION

As described in the following Compensation Discussion and Analysis, our executive compensation programs are designed to align the interests of our executive officers with those of our stockholders by tying a significant portion of the compensation they receive to Company performance, and by providing a competitive level of compensation in order to attract, retain, and reward executive officers, who are critical to the long-term success of our business. Under these programs, our named executive officers are rewarded for the Company’s financial performance, individual performance, and long-term value creation, as well as to facilitate retention, and reflect market realities. Please read the Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the fiscal year 2019 compensation of our named executive officers.

As required by Section 14A of the Exchange Act, this proposal, commonly referred to as a “say on pay” proposal, seeks a stockholder advisory vote on our named executive officers’ compensation, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K and in the Compensation Discussion and Analysis, through the following resolution:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 2019 Summary Compensation Table, and the other related tables and disclosure.”

The say-on-pay vote is advisory and, therefore, not binding on the Company. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and consider the result of the advisory vote in designing and evaluating our executive compensation programs.

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                         Compensation Discussion and Analysis

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Discussion and Analysis section of this Proxy Statement provides an overview of our executive compensation philosophy and objectives and describes the material elements of our executive compensation programs, the compensation decisions the Compensation Committee (the “Committee”) has made under those programs, key factors that were considered, and provides details of the compensation paid to our named executive officers.

The Compensation Discussion and Analysis is organized in the following sections:

2019 Named Executive Officers

Our named executive officers for 2019, as defined by the SEC, were as follows:

As previously disclosed, following his resignation as CEO, Mr. Corona became a non-executive employee of the Company, in a transition and advisory role until his expected retirement from the Company on or about June 30, 2020. Effective October 1, 2019, Mr. Quigley assumed the role of President and CEO. A description of the compensation arrangements for Messrs. Corona and Quigley in connection with the transition can be found under the heading “CEO Transition” in the section Compensation Programs: Decisions and Actions in 2019 below.

Executive Summary     

Fiscal 2019 Performance

Kelly’s philosophy as a talent company is rooted in the conviction that our business makes a difference on a daily basis – in the lives of our employees and talent networks, for our customers, in the local communities we serve and in the broader economy. As work has evolved so has our range of solutions, growing over the years to reflect the changing needs of our customers and the changing nature of work itself. We have progressed from a traditional office staffing company into a workforce solutions leader delivering expertise in a portfolio of specialty services. As talent management has become more complex, we have developed innovative solutions to help many of the world’s largest companies plan for and manage their workforce through outsourcing, consulting, recruitment, talent advisory, career transition, and supplier management services. We offer innovative outsourcing and consulting services, as well as staffing on a temporary, temporary-to-hire, and direct-hire basis. We also provide a suite of talent fulfillment and outcome-based solutions, delivering integrated talent solutions on a global basis. In doing so, we enable companies to access skilled talent that can move their businesses forward.

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                         Compensation Discussion and Analysis

Kelly is committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the markets we choose to compete, which is the foundation of our strategy in 2019 and beyond. This strategic intent is underpinned by our Noble Purpose, “We connect people to work in ways that enrich their lives,” and is brought to life by our expected behaviors and actions:

By aligning ourselves with our Noble Purpose, executing against these strategic pillars, and investing in additional innovation, we intend to reap the benefits of operating as a more agile and focused organization and we expect to achieve new levels of growth and profitability as we develop further specializations across our portfolio of business.

During 2019, we continued our progress as a talent solutions company and identified several specialty growth platforms for investment. Early in 2019, we expanded our engineering portfolio with the acquisition of Global Technology Associates, LLC (“GTA”) and NextGen Global Resources LLC (“NextGen”), leaders in the growing 5G telecommunications market. These acquisitions position Kelly as one of the leading engineering workforce solutions companies in this fast-growing market. And in January 2020, we acquired Insight Workforce Solutions LLC (“Insight”), an educational staffing company, to expand our leadership position in the U.S. education talent solutions industry. We intend to further accelerate our efforts to drive revenue and earnings growth through additional inorganic growth platforms, making smart acquisitions that align with Kelly’s focus on specialization.

We continue to make investments in technology, particularly those which support greater efficiency in finding talent to answer customer needs. We are accelerating the implementation of our front office platforms, which when fully deployed in mid-2020, will streamline the processes and workflows associated with recruiting, onboarding, and reassigning workers. This investment will create the platform from which we will deploy additional operational improvements over the next several years that will enhance the experience of the hundreds of thousands of job seekers who interact and work with Kelly each year.

Our review of the commercial staffing operations delivered by our U.S. branch network in the first quarter of 2019 resulted in the reorganization of our operations to improve geographic coverage and operational efficiency. The new structure will allow us to refine our focus on specialties within the commercial staffing portfolio, including light industrial, electronic assembly, office professionals, and contact center staffing. During 2019, we recorded total restructuring charges of $5.5 million as a result of these actions. While we have already gained efficiency from the restructure, the growth we anticipated has not yet occurred. We remain committed to delivering revenue growth in our U.S. market and have initiated further actions to modernize our operations and deliver on that commitment.

Key performance highlights for 2019 incentive plan financial measures were lower than the prior year and resulted in below target payouts:

While faced with market conditions that may hamper our efforts, including a sluggish manufacturing sector and a tight labor market, and the recent business challenges arising from the Coronavirus, Kelly continues to focus on accelerating the execution of our strategic plan and making the necessary investments and adjustments to advance that strategy. Our objective is to become an even more agile, consultative, and profitable company, and we are reshaping our business to make that goal a reality. We will measure our progress using financial measures, including: revenue growth (both organic and inorganic); gross profit rate improvement; and conversion rate and EBITDA margin.

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        Compensation Discussion and Analysis

We are acting with urgency to achieve the following:

Key Executive Compensation Program Highlights for Fiscal 2019

We continue to evaluate our executive compensation program and make changes to further align it with our strategic priorities and to reward both short- and long-term business success. We believe we have designed a program that aligns with stockholder interests, incentivizes growth and operational excellence, and demonstrates a clear linkage between compensation and performance. The program continues to seek to minimize incentives for management to take excessive risks. The Committee worked with management and its independent compensation consultant, as described later in this document, to review current compensation programs, including the incentive plans, and made the decisions described below in 2019.

The Board has adopted two plans that provide the framework for incentive compensation opportunities for our senior officers, a group that includes our executive officers.

2019 STIP Design and Results

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                         Compensation Discussion and Analysis

2019-2021 LTI Design

2017-2019 LTI Results

2019 Individual Compensation Decisions

The Committee believes these actions support the strategic direction of the Company and help position it for long-term success in achieving its goals. These compensation decisions and actions are discussed in more detail below.

Executive Compensation Philosophy, Objectives, and Design

Our executive compensation philosophy is to provide market-based pay opportunities with incentive payouts aligned with the achievement of the Company’s overall short- and long-term business strategies and results. The design of our executive compensation programs allocates total compensation to fixed and variable pay elements resulting in a mix of short-term and long-term pay elements. The Committee continually evaluates our executive compensation programs to ensure that the Company provides market-competitive opportunities that enable us to attract and retain highly qualified individuals to lead the organization and drive business success in the competitive and ever-changing business environment in which we operate. Our executive compensation programs are designed to achieve the following objectives:

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Compensation Discussion and Analysis

Pay for Performance Framework

The Committee believes that a majority of a senior officer’s compensation should be “at risk” and based upon the achievement of corporate and business unit results, the Company’s share price performance, as well as an individual’s performance. As a result, senior officers participate in incentive programs that provide them with the opportunity to earn awards that are directly tied to the Company’s performance and that drive sustainable long-term stockholder value. The Company’s compensation programs provide an incentive for senior officers to meet and exceed performance goals. Executives are held accountable for results and rewarded with above target payout amounts for performance that exceeds target goals. When target goals are not met, award payouts are designed to deliver below target payouts or no payouts. We believe the combination of our annual incentive awards and long-term equity incentive awards align the interests of our senior officers with the interests of our stockholders.

CEO and Other Named Executive Officers Pay Mix

While we believe that a majority of an executive officer’s target compensation opportunity should be performance-based, we do not have a specified formula that defines the overall weighting of each element. We believe that the higher a role is positioned within the organizational structure, the greater the emphasis on performance-based compensation should be. As such, the Chief Executive Officer (“CEO”) has a greater percentage of his compensation opportunity that is performance-based through higher target opportunities for STIP and LTI, as compared to the compensation opportunities of the other named executive officers (“NEOs”). At-risk compensation consists of annual cash incentive awards and long-term equity awards (restricted shares and performance shares) that are contingent upon the achievement of pre-established performance goals. The following charts illustrate the 2019 Target Total Direct Compensation mix for our President and CEO and the other named executive officers combined (as of December 31, 2019) and includes the pay elements of base salary, STIP (at target), restricted shares, and performance shares (at target):

FY 2019 CEO Target Compensation Mix		FY 2019 Other NEO Target Compensation Mix

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Compensation Discussion and Analysis

Elements of Compensation for Named Executive Officers

The Committee determines the elements of total direct compensation that we provide to our senior officers, a group that includes the named executive officers. The elements of our fiscal 2019 executive compensation program and the objectives for each are as follows:

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Compensation Discussion and Analysis

2020 Executive Incentive Plans

For the 2020 incentive plan designs, the Company continues to focus on pay-for-performance alignment by using multiple financial measures and Relative TSR to strongly drive our key business objectives and stockholder value. Additional details regarding the 2020 incentive plan designs will be presented in our 2021 proxy statement.

Process for Determining Executive Compensation

Role of the Compensation Committee

The Committee designs and administers the Company’s executive compensation programs and policies, and regularly reviews these programs and policies relative to its objectives, applicable new legal and regulatory practices, evolving best practices, and corporate governance trends. The Committee and members of the Board of Directors determine the compensation of the CEO. The CEO’s total compensation is comprised of base salary, STIP, and LTI award opportunities, and is the same design as the other named executive officers. The CEO does not participate in recommendations or discussions related to his own compensation levels. As part of its responsibility for executive compensation, the Committee annually reviews and determines the compensation of each of our senior officers, including the named executive officers listed in the Summary Compensation Table of this Proxy Statement, based on each individual’s performance including consideration of ethical behavior, achievement of planned goals, relevant market comparisons, the recommendations of the CEO, and other factors. The Committee reviews the costs and short- and long-term benefits of the compensation arrangements it considers and approves for senior officers.

The responsibilities of the Committee are defined in its charter, which can be found on the Company’s website at kellyservices.com.

Role of the Independent Compensation Consultant

Since October 2014, the Committee has engaged Pay Governance LLC as its independent compensation consultant (the “Consultant”). The Committee considers analysis and guidance from the Consultant when making compensation decisions on plan design; the merits of various incentive plan performance measures; senior officer pay levels, including that of the CEO and our other executive officers, relative to peer group and other market data; composition of peer group companies; stock ownership requirements; and other pay practices. In addition, the Consultant updates the Committee on market trends and best practices in executive compensation and, as requested, provides data and guidance on other items such as Director compensation. The Committee uses its own independent judgment to make all decisions related to the compensation of the Company’s senior officers.

During 2019, the Consultant regularly attended Committee meetings and communicated with the Chairman of the Board, the Committee Chairman, and the Committee Vice Chairman outside of Committee meetings. The Committee regularly meets with the Consultant in private session (without members of management). As directed by the Compensation Committee, the Consultant also met with the Senior Vice President and Corporate Secretary (“Corporate Secretary”) and members of the Executive Compensation, Finance, and Corporate Governance teams of the Company. The Consultant maintains a direct reporting relationship to the Committee on all compensation matters.

The Committee conducts an annual assessment of the Consultant’s independence, using factors established by Nasdaq. The Consultant provided no services to the Company in 2019 other than services to the Committee. The Committee reviewed and affirmed the independence of the Consultant as the Compensation Consultant to the Committee and concluded the work performed by the Consultant did not raise a conflict of interest.

Role of Management

The Committee consults with the CEO and the Corporate Secretary to obtain feedback with respect to the strategic direction of our executive compensation programs.

The CEO makes recommendations for each of the executive officers about elements of their total compensation. He bases his recommendations on the assessment of each executive officer’s performance, as well as the performance of their respective business or function and other factors. The Committee takes into consideration the recommendations of the CEO when determining the compensation of the other executive officers.

In addition, the CFO provides periodic financial updates and information to the Committee, to aid in establishing incentive plan goals and determining payout amounts.

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Compensation Discussion and Analysis

Comparator Data

The Committee uses third-party survey data for comparably sized general industry companies and available data from a select group of peer companies, in determining the competitive positioning of our compensation programs, and the individual compensation opportunities of each of our senior officers, including the named executive officers.

Each senior officer’s performance is reviewed (see Senior Officer Performance Reviews and Succession Planning below) and compensation decisions are made on an annual basis (or as a senior officer’s duties and responsibilities change). Base salaries, target STIP, and target long-term incentive opportunities are benchmarked against a group of comparable executive positions in general industry companies of similar revenue size as reflected in multiple third-party surveys. We seek to establish target total direct compensation opportunities (defined as base salary, target STIP, and target long-term incentive) for our named executive officers that are near a competitive range of the median of the market data. Compensation ultimately earned from these opportunities can vary from the targeted levels based on the company, business unit, and individual performance. Various other factors are taken into consideration and in certain circumstances, we may target pay above or below the competitive median. Individual target total direct compensation may be above or below the median depending on Company performance, cost considerations, the role’s scope of responsibilities, individual experience and performance, and any succession, retention or internal equity considerations. The Company has taken a conservative approach to target long-term incentive opportunities generally below market median for senior officers. This approach is in support of the Company’s efforts to reduce costs in connection with its investment strategy and its goal to become more profitable.

In 2019, a competitive executive compensation analysis was performed which included both an analysis of third-party survey data prepared internally by the Company’s Executive Compensation group, and a peer group review of CEO pay prepared by the Consultant. Third-party general industry survey data from Hewitt, Mercer, and Willis Towers Watson was used to prepare the survey analysis. Specific companies that participated in the third-party surveys were unknown and not a factor in the Committee’s deliberations. The survey analysis was reviewed by the Consultant for the Committee.

The Consultant worked with the Committee and management to develop an updated group of peer companies to be used for market comparison purposes in terms of CEO pay levels and executive pay practices. We do not believe many companies compete directly with us in all areas of our business or are of similar size. However, in order to have a reference group of publicly-traded comparators, the Consultant has identified a group of relevant companies that compare to Kelly in at least some areas of our business. The resulting group of twelve comparator companies consists solely of staffing and HR-focused companies with generally similar annual revenues and recent market cap. The majority are multi-national/global companies headquartered in U.S. The following updated group of companies includes more direct peers and a balanced mix of some significantly smaller and larger companies in similar industries. The peer group was used by the Committee and management as another reference point when assessing 2019 executive pay practices and CEO pay levels:

The Committee considers peer group and general industry survey data as a point of reference, not the sole factor in determining senior officers’ compensation. The third-party survey data and peer group analysis represent “Market Data” when referenced throughout this Compensation Discussion and Analysis. The Committee considers all of the resources provided as part of a holistic process that also includes officer performance and the recommendations of the Company’s CEO regarding total compensation for senior officers.

Tally Sheets

In addition to Market Data and for use as background information, the Executive Compensation group provides the Committee with comprehensive tally sheets for each executive officer, summarizing up to four years of historical target and actual total compensation data and long-term incentive grant detail that includes grant date fair value as well as the intrinsic value of outstanding award opportunities. The Committee reviews tally sheets for the executive officers and believes they are a useful multi-year reference tool, along with other perspectives, when considering whether compensation decisions reflect the Company’s executive compensation philosophy and performance.

Senior Officer Performance Reviews and Succession Planning

Annually, the Committee conducts a comprehensive senior officer performance review that includes succession planning and identification of officer developmental opportunities. Updated performance evaluation templates were developed in 2019 for use with the senior officers. Detailed executive performance review information for each of the senior

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Compensation Discussion and Analysis

officers, including the named executive officers, is prepared by the Chief Human Resources Officer (“CHRO”). Methodology that had been implemented the prior year was enhanced for 2019 and used to identify and develop the Company’s talent, including a framework to assess future leadership needs, evaluate talent, and a succession planning and talent development system. Sessions were held with multiple levels of the organization to discuss talent and development, increasing transparency with the sharing of information, and understanding of key talent across leadership teams and business units. Individual development plans continue to be prepared to identify future opportunities for emerging leaders, including increased development through experiential learning opportunities and formal coaching.

The performance review information for each of the senior officers includes key annual initiatives, performance results, strengths, and development opportunities. Senior officers with high technical knowledge in one area of functional expertise and those with the ability to have cross functional potential and serve in many capacities were identified. The CEO reviews the performance of the other executive officers and presents their individual performance assessments, development plans, and succession strategies to the Committee. Executive officers who have direct reports who are senior officers, present the individual performance assessments, development plans, and succession strategies to the Committee for each of those senior officers. During the individual performance assessments, the Committee asks questions, renders advice, and makes recommendations on matters that include individual development needs, succession planning, and retention. The Company’s Chairman of the Board and the Committee Chair present the performance review for the CEO to the other Committee members. None of the senior officers are present when their performance is being discussed by the Committee. Each executive’s individual performance assessment is used by the Committee, together with the compensation analysis discussed in the previous section and the recommendations of the CEO, to determine compensation for the senior officers.

The Company’s succession plan is updated annually in connection with the performance assessments and is approved by the Board. The plan documentation includes all executives at the senior officer level, as well as their potential successors from within the Company in case of an unexpected disability or departure of a senior officer. Documentation includes detailed executive performance review information as discussed above, readiness assessments, and at least one potential successor for each role. Any changes to the plan during the year also require the approval of the Board.

Compensation Programs: Decisions and Actions in 2019

CEO Transition

As previously disclosed, effective September 30, 2019, Mr. Corona resigned as President and CEO of the Company. Mr. Corona continues to serve as a director of the Company through his current term and thereafter as provided by the Board. He currently serves as a non-executive employee in a transition and advisory role, until his expected retirement on or about June 30, 2020. In connection with the transition, the Company and Mr. Corona entered into a transition employment agreement, which sets forth the terms of Mr. Corona’s employment in a non-executive capacity until his retirement. During the transition period, Mr. Corona assists with the leadership transition and receives a base salary of $15,000 per month. Mr. Corona received a prorated payout under the STIP with respect to his service for the first nine months of 2019 as President and CEO as disclosed in the section, Annual Cash Incentives below. Mr. Corona received shares earned under the 2017-2019 LTI awards as disclosed in the Long-Term Incentives section below. He remains eligible to receive prorated shares that become earned under certain conditions for the 2018-2020 LTI awards and the 2019-2021 LTI awards. Upon Mr. Corona’s retirement, he will forfeit any outstanding restricted shares that have not vested. Effective September 30, 2019, Mr. Corona is not eligible for severance benefits from the Company.

Effective October 1, 2019, Mr. Quigley assumed the role of President and CEO and became a director of the Company. The Committee approved an increased base salary of $840,000 for Mr. Quigley, an increased STIP target opportunity from 85% to 110% of base salary earnings, and his long-term incentive target opportunity was increased from 140% to 200% of base salary. The committee also approved an additional grant of 2019 LTI awards with a total grant date value of $218,750. Mr. Quigley’s benefits under the Company’s Senior Executive Severance Plan increased from a Tier 2 participant to a Tier 1 participant. Mr. Quigley’s severance eligibility can be found in the section below titled, Potential Payments upon Termination or Change in Control.

Base Salary

Base salaries for senior officers, including the named executive officers are intended to be competitive with Market Data to ensure that the Company can attract and retain the executives necessary to successfully lead and manage the organization. Base salaries generally fall within a range (+/- 15%) around the median of salaries in the Market Data, as individual base salaries will vary based upon the factors described below. Based on Market Data available at the time the review was conducted in November 2018, we determined that the base salaries of our named executive officers were within this competitive range of the market medians for comparable roles. Base salary is only one component of target total direct compensation and may be affected by other components to ensure that target total direct compensation meets compensation objectives.

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Compensation Discussion and Analysis

The Committee reviews the base salaries of senior officers, including the named executive officers, on an annual basis (or as a senior officer’s duties and responsibilities change). Base salaries are determined by the Committee for each of the senior officers based on various factors, including the scope and responsibilities of the role, an individual’s experience and performance in the role, their current level of pay compared to Market Data, internal pay equity, the recommendations of the CEO, and consideration of the Company’s salary adjustment budget.

The Company’s annual total compensation review process for all employees, including the senior officers, typically occurs during the first quarter to coincide with the timing of any potential incentive award payouts. The timing alignment of compensation elements is intended to reinforce the Company’s pay for performance philosophy and provide each employee with their “total compensation” overview. In November 2018, the Committee conducted its annual review of base salaries of the senior officers, including named executive officers. In February 2019, it was determined that no changes would be made to base salary levels for Messrs. Corona and Quigley and Ms. Carroll as the Committee believed their salary levels were market competitive. Salaries for Messrs. Thirot, Boland and Bradley and Ms. Lim-Johnson were increased on average 3.6%, to recognize performance and move market competitiveness closer to median.

Effective with his promotion to President and CEO on October 1, 2019, the Committee approved a base salary increase of 46% for Mr. Quigley to move his salary closer to competitive market levels for the CEO position. At the same time, Messrs. Thirot and Boland each received base salary increases of 5% in recognition of additional responsibilities.

In consideration of the factors noted above, the following base salaries for the named executive officers were approved by the Committee in 2019:

Notes:

Annual Cash Incentive

The Committee believes that the named executive officers should have a meaningful percentage of their total compensation earned through annual “at risk” performance-based incentives. The percentage of target total compensation at risk under the terms of the STIP increases significantly as the individual executive’s responsibilities and influence on overall corporate performance results increase. The STIP is designed to encourage executives to meet and exceed the Company’s short-term goals that align with overall corporate strategy and improve stockholder value.

The STIP target opportunity is established as a percentage of each individual’s actual base salary earnings and is targeted near the median Market Data, but may vary based upon individual factors, internal equity, and other considerations. STIP payments for all participants are capped at 200% of the target incentive award opportunity. In November 2018, the Committee reviewed the target incentive opportunity for each of the named executive officers and found that all but one were appropriately positioned relative to the Market Data. The Committee approved increasing Mr. Thirot’s STIP target from 75% to 80%, effective January 1, 2019.

Mr. Quigley’s STIP target opportunity was increased from 85% to 110% of base salary effective with his promotion to President and CEO on October 1, 2019. His 2019 STIP award amount was prorated between the time he spent in each role and the associated STIP goals, target percentage, and base salary earnings.

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Compensation Discussion and Analysis

The following table shows the 2018 and 2019 STIP target opportunities, as a percent of base salary, for our named executive officers:

In the months leading up to year end, the Committee reviews and determines the objectives, performance measures, and other terms and conditions of the STIP for the following plan year. For 2019, the Committee approved the use of the same multiple performance measures as were used in 2018 to comprise the corporate component of the STIP. The Committee selected these multiple financial measures again for the STIP because they aligned with business objectives and value creation, provided balance, ensured a strong pay-performance linkage, and improved line of sight for senior officers, including the named executive officers. Measures selected for 2019 STIP were:

Payout for threshold performance under the corporate component of STIP is 50% of a named executive officer’s target payout opportunity, with zero payout earned for performance below threshold. Achievement of target performance results in target payouts for the named executive officers. Performance above target earns incentive payouts above target and up to the maximum of 200% of target. As in prior years, the 2019 STIP design includes a ‘gatekeeper’ goal which must be achieved to earn a payout under any measure. The gatekeeper goal is earnings from operations with a required level of achievement of at least 60% of target.

Performance measures used for purposes of STIP are the same as defined in the Company’s GAAP financial statements, excluding special items such as: changes in accounting principles, gains or losses on acquisitions or divestitures, changes in budget due to acquisitions or divestitures, restructuring expenses, and other unusual items, which are defined as such and quantified in the financial statements and/or footnotes to the Company’s Annual Report on Form 10-K. Adjustments would apply only to unbudgeted items. For the total gross profit measure, constant currency (using the Company’s 2019 budgeted currency exchange rate) was used to determine values in establishing achievement of the incentive plan goals for 2019.

In February 2019, the Committee determined and approved threshold, target, and maximum performance goal levels for the 2019 STIP. The threshold goals were set at levels for which the Committee believed it was appropriate to start earning incentives; target goals were set at the budgeted levels, which the Committee considered were “challenging but achievable”; maximum goals were set at significant stretch levels for which the Committee believed the earning of two times target payouts was warranted. In approving the performance goals in February, the Committee determined it would review goals again at the May meeting that would include the estimated impact of the Company’s January 2019 acquisitions. In May 2019, the Committee approved higher performance goals, as shown in the table below, that reflected the impact of the acquisitions. For the Corporate measures, straight line interpolation occurs for achievement of performance between threshold and target, and between target and maximum. For the business unit measures for Mr. Quigley and Ms. Carroll, there is no straight-line interpolation between payout levels of the payout schedule. For the business unit goal for Mr. Bradley, straight line interpolation occurs for achievement between payout levels. The goals at threshold, target, and maximum for the 2019 STIP, as well as resulting performance for each measure of the corporate component were as follows:

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Compensation Discussion and Analysis

Total Company revenue from services for 2019 declined, due to revenue decreases in Americas Staffing and International Staffing, partially offset by an increase in GTS revenue. The Company’s gross profit rate increased across all business segments from the prior year. The Company’s return on gross profit and earnings from operations were down from 2018 due to restructuring expense.

Messrs. Corona, Thirot, and Boland, and Ms. Lim-Johnson’s STIP opportunities were based 100% upon the performance measures of the corporate component, as shown above.

Ms. Carroll’s STIP opportunity was based 50% on the corporate component measures and 50% on the business unit measures for which she was accountable. Payout results for the business unit measures for Ms. Carroll were positively impacted by increased revenue, primarily due to the GTA acquisition and program expansion in our Business Process Outsourcing (“BPO”) and KellyConnect products. These increases were partially offset by lower demand in centrally delivered staffing. The GTS gross profit rate increased due to improving product mix coupled with lower employee-related costs. Total SG&A expenses decreased due to proactive cost management as we continue to align our resources and spending levels with volume and gross profit in our products. Decreases were partially offset by an increase in SG&A expenses related to the January 2019 acquisition of GTA. The measure, “Contribution” that appears below for Ms. Carroll and Mr. Quigley is defined as income from operations.

Performance results for each of Ms. Carroll’s business unit measures are as follows:

Teresa Carroll

Mr. Quigley’s STIP opportunity for the first nine months of 2019 was based 50% on the corporate component measures and 50% on the business unit measures for which he was accountable in his role as Executive Vice President and President, Global Staffing and General Manager, Global IT, Global Service, and Global Business Services. Payout results for the America’s Staffing business unit measures for Mr. Quigley were positively impacted by the acquisition of NextGen in January 2019. Revenue from services was down, reflecting a decrease in hours volume and an increase in average bill rates. The decrease in hours volume was primarily due to the disruption resulting from the restructure of the U.S. branch-based staffing in the first quarter of 2019 and slower achievement of the related benefits. The increase in average bill rates was the result of wage increases and stronger revenue growth in our service lines with higher pay rates. The change in revenues reflects decreases in volume in our light industrial and office services specialties, partially offset by an increase in engineering, educational staffing and science specialties. The Americas gross profit rate increased in comparison to the prior year, having been positively impacted by the addition of NextGen. SG&A expenses increased due to the addition of NextGen and also restructuring expenses related to U.S. branch-based staffing operations severance costs. International Staffing revenue from services decreased from the prior year, primarily due to revenue declines in France and Germany, reflecting current staffing market conditions. These decreases were partially offset by increased revenue in Russia, due to higher hours volume. International Staffing gross profit decreased as a result of declining revenue. Total SG&A expenses for International Staffing decreased due to continued effective cost management to align to revenue trends. Mr. Quigley’s STIP opportunity for the last three months of 2019, in his role as President and CEO, was based 100% on the corporate component.

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Compensation Discussion and Analysis

Performance results for each of Mr. Quigley’s business unit measures are as follows:

Peter Quigley

Mr. Bradley’s STIP opportunity was based 70% on the corporate component measures and 30% on the business unit measure, days sales outstanding (“DSO”) Americas for which he was accountable. For the DSO measure, a lower value reflects better performance. Payout results for the business unit measure for Mr. Bradley were just above threshold, resulting in a payout of 7.5%.

Performance result for Mr. Bradley’s business unit measure is as follows:

James Bradley

Under the terms of the STIP, the Committee retains the right in its discretion to reduce a STIP award based on Company, business unit, or individual performance. The Committee has no discretion to increase a STIP award for named executive officers (though the Committee may approve a special bonus for named executives officers on a discretionary basis to recognize exceptional performance or actions not related to objectives set forth in the STIP; in 2019, no discretionary bonus awards were made to named executive officers). STIP awards made in 2019 to named executive officers are subject to the Company’s Clawback Policy.

Based on these performance results, at its February 11, 2020 meeting, the Committee reviewed and approved payments to the named executive officers in accordance with the STIP provisions as follows:

Long-Term Incentives

The EIP provides for long-term incentives that reward executives for achieving the Company’s long-term growth and profitability goals. Long-term incentive compensation is also intended to help the Company retain key employees, and provide those employees shared financial interests with the Company’s stockholders and positively influence their job performance and longer-term strategic focus. The EIP allows for grants of equity and non-equity awards to key employees.    

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Compensation Discussion and Analysis

The Committee believes that compensation programs for the Company’s senior officers should include strong alignment between pay and performance, with a significant portion of “at risk” pay. As a result, since 2015 the Committee has provided long-term incentives for senior officers, including the named executive officers with grant levels based 75% on performance shares (at target) and 25% on restricted stock in order to create award opportunities that heavily emphasize performance. The current incentive mix emphasizes performance-contingent awards that are delivered through performance shares and places a lower weighting on restricted shares.

On average, target LTI awards granted to senior officers have historically been and currently remain below market median. The target LTI award amounts for each senior officer in 2019, including the named executive officers, were based on an established value for each officer level. The number of target shares granted to each named executive officer is based on the grant value and closing stock price on the date of grant and can be found in the “Grants of Plan-Based Awards” table, later in this document. For performance share awards, the actual value realized, if any, for the grant will be based upon achievement of the three-year goals as determined in early 2022 and the price of the Company’s stock.

Under the terms of the EIP, the Committee retains the right in its discretion to reduce an LTI award based on individual performance. The Committee has no discretion to increase an LTI award for named executive officers. LTI grants made in 2017 and prior years were designed to comply with the requirements of Section 162(m) of the Code and any performance-based awards made under the EIP are subject to the Company’s Clawback Policy.

Performance Shares

Performance shares provide senior officers with the opportunity to earn shares, from zero to 200% of their target opportunity, based on achievement of pre-established measures and goals. For the 2019-2021 performance period, the Committee selected the following two new equally weighted financial performance measures for the performance shares: gross profit growth and average conversion rate improvement in order to reinforce the Company’s focus on profitable growth and expense control. The Committee also elected to continue to use TSR relative to the S&P SmallCap 600 Index to reward relative TSR performance, however determined that it would be applied as a modifier for the 2019-2021 LTI awards (not a separate measure). Using the relative TSR measure as a modifier strengthens accountability to financial results and enhances alignment between earned awards and expense. Financial measure outcomes can be impacted by the TSR modifier either positively or negatively as a multiplier from between zero to 25%, with overall payouts under the plan capped at 200% of target. The Committee believed that these performance measures were aligned with the business strategy and stockholder interests and provided balance with STIP measures.

For the 2019-2021 grant of performance shares, the two financial measures, gross profit growth and average conversion rate improvement, as well as the Relative TSR modifier, were established to have three-year goals for the full performance period 2019-2021. This design provides multi-year accountability for performance results. In February 2019, the Committee approved goals at threshold, target, and maximum levels of performance for each of the measures for 2019-2021. At the end of the three-year performance period in early 2022, results for each of the two financial measures, plus the TSR modifier, will determine achievement and earning, if any, of shares. The following table illustrates performance periods for each of the measures for the 2019-2021 performance shares:

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Compensation Discussion and Analysis