Note 15 Provisions for employee benefits
Provisions for employee benefits
Alliander has various pension and similar plans for its current and former employees. The majority of the pension liabilities are insured with ABP. In addition to this main pension plan, Alliander has other defined benefit and defined contribution plans that are not significant in size. The ABP pension scheme is classed as a multi-employer defined benefit plan. A proportionate part of the gross obligation, plan assets and costs associated with the plan should be recognised in Alliander's financial statements. However, as Alliander does not have access to the required information, the pension plan is treated as a defined contribution plan. Where there is an agreement for a multi-employer plan that specifies how a surplus is distributed to the participants or a deficit is to be financed and where the plan is accounted for as a defined contribution plan, an asset or liability arising from the agreement is recognised in the balance sheet. The resulting gains or losses are recognised in the income statement. The pension plan administered by ABP has none of the above features. As a result, no asset or liability has been recognised in the balance sheet. The same applies to the pensions administered by BPF Bouw and Pensioenfonds voor Metaal en Techniek.
Prompted by the deterioration of the funding ratio in 2008, ABP introduced a recovery plan in 2009. At the start of each year ABP evaluates the progress of the recovery on the basis of the actual funding ratio at the end of the preceding year. The funding ratio as at year-end 2015 was 98.7%. The pension contribution rate in 2015 was 19.6% of pensionable salaries. The pension contribution rate for 2016 is 17.8%. This lower contribution rate is connected with the switch from wage indexation to price indexation and the fact that a one-off component of 0.9% is no longer included in the 2015 contribution rate. ABP is expected to implement a surcharge of 1 percentage point on the contribution rate with effect from 1 April 2016. This surcharge is necessary because ABP’s financial position as at 31 December 2015 was not adequate.
Alliander’s relative share in the ABP pension scheme based on numbers of participants is approximately 0.5%. The pension contributions payable in 2016 for the multi-employer plans are expected to amount to €54 million.
In addition to the above multi-employer pension plans in the Netherlands, Alliander has two defined benefit plans relating to subsidiaries in Germany, although these are not of material importance. These plans are accounted for in accordance with IAS 19. This means that, with effect from 2013, actuarial gains and losses and remeasurements are recognised directly. Because of the small amounts involved, however, this is not visible in the consolidated financial statements.
Post-employment benefits essentially concern the medical benefits scheme for retired employees. This scheme has not been transferred to an external insurance company or pension fund. The post-employment benefits provision totalled €1 million at the end of 2015 (2014: €2 million). The provision for post-employment benefits was made up as follows:
Other long-term employee benefits
Alliander offers a number of other long-term employee benefits. The provision covers the following types of benefit:
- jubilee benefits; this provision covers the jubilee benefits paid to employees after 10, 20, 30, 40 and 50 years of service and the payment on reaching retirement age;
- long-term sickness benefits; this benefit covers the obligation to continue paying all or part of an employee's salary during the first two years of sick leave;
- incapacity benefit; Alliander bears the risk for benefits payable under the Work and Income (Ability to Work) Act (WIA) – the relevant provision covers the obligations towards Alliander employees who become wholly or partially unfit for work;
- unemployment benefits; Alliander is the risk-bearer within the meaning of the Unemployment Act(WW); if an Alliander employee becomes unemployed, the unemployment benefit is borne by Alliander for a period of between three months and 38 months, depending on the employee's employment history;
- reduction of working hours of older employees; in the light of legislation on early retirement, a transitional scheme was agreed in the 2005 Collective Labour Agreement under which older employees could reduce their working hours in the future. The table below shows the composition of other long-term employee benefits.
Other long-term employee benefits
This provision covers payments and/or supplements to benefits paid to employees whose employment contract has been or probably will be terminated. These benefits and supplements are based on the Social Plan operated by Alliander and individual arrangements. The Social Plan is periodically renegotiated and agreed. In 2015, an amount of €19 million was added to the reorganisation provision (2014: €21 million). The provision for termination payments/reorganisations totalled €18 million at the end of 2015 (2014: €20 million).
Movements in provisions for long-term employee benefits
The held-for-sale classification means that Endinet’s liabilities as at year-end 2015 carried in Alliander’s consolidated balance sheet have been reclassified to liabilities held for sale.
The following table shows the movements in the provisions for post-employment benefits, other long-term employee benefits and the termination benefits/ restructuring provision.
Movements in provisions for employee benefits
The main assumptions used in determining the provisions are given below::
Short-term employee benefits
Short-term employee benefits were €32 million at the end of 2015 (2014: €41 million) and relate to all obligations to employees, other than the current portion of long-term employee benefits, that are expected to be settled within 12 months after the balance sheet date. Short-term employee benefits include salaries still to be paid, accrued holiday entitlement, bonuses and other staff costs still to be paid.