Note 15 Provisions for employee benefits

Post-employment benefits

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 2017 was 101.5% and the pension contribution rate in 2017 was 21.1% of pensionable salary. With effect from 1 January 2018, the contribution rate for the retirement and dependants’ pension rises to 22.9%. The main reasons for the increase are the low interest rate and the fact that we are living longer.

Alliander’s relative share in the ABP pension scheme based on numbers of participants is approximately 0.5%. The pension contributions payable for the multi-employer plans in 2018 are expected to total €73 million (of which an expected €54 million will be borne by the company).

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 the amended 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. The post-employment benefits provision totalled €2 million at the end of 2017 (2016: €2 million), 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; and

• 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;

Termination/reorganisation 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 2017, an amount of €10 million was added to the reorganisation provision (2016: €19 million). The provision for termination payments/reorganisations totalled €12 million at the end of 2017 (2016: €18 million).

Movements in provisions for long-term employee benefits

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

Assumptions

The main assumptions used in determining the provisions are given below:

Short-term employee benefits

Short-term employee benefits 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, which at year-end 2017 amounted to €16 million (2016: €25 million). At the end of 2017, Alliander agreed with the Works Council and the unions that in future the variable Performance-Related Pay and Profit-Sharing scheme should be replaced by awarding a fixed end-of-year bonus of 5.94%. This change in the CLA relating to the industry has retroactive force from 1 January 2017. The end-of-year bonus is a percentage of the monthly salaries paid in the calendar year and is payable in December, in contrast to the previous scheme, under which the bonus was paid in April of the following year.