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 policy funding ratio came in at 95.8% at the end of December 2019; the current funding ratio is 97.8%, while the contribution rate for the retirement and dependants’ pension was 24.9% of pensionable pay in 2019. The contribution rate for the retirement and dependants’ pension will continue to be 24.9% in 2020. The premium for the ABP incapacity pension (AOP) will rise by 0.4% in 2020. ABP deems this premium increase necessary 'because the chance of incapacity increases with age and because ABP expects to see enrolment numbers rise because it has started to proactively make participants aware of their possible entitlement to an incapacity pension.' ABP expects interest rates to stay low for a long time to come and to need more premium income from 2021 onwards to be able to pay the pensions. The outlook is that premiums will rise considerably after 2020.

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 2020 are expected to total €73 million (of which an expected €54 million will be borne by the company).

In addition to the 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 2019 (2018: €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:

• 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; and

• Long-service benefits; these are built up in advance through this provision for all Alliander permanent staff. Network Operators reached agreement with the unions on a new collective labour agreement at the end of 2018. The new collective labour agreement includes changes to the long-service benefits scheme: the existing long-service benefits payable at 10, 20, 30, 40, and 50 years of service and the proportionate long-service benefits scheme are being discontinued. Furthermore, the benefit payable on retirement (1.5 times monthly salary) ceases at the end of 2019. The revised long-service benefits scheme covers long-service benefits payable on attaining 25 and 40 years of service. In addition, employees born before 1 January 1963 (aged 57 or older) and in the company’s employment on 31 December 2019 retain their right to the benefit on retirement. Also, the 50-year long-service benefit will continue for five years as from 1 January 2020.

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 2019, an amount of €13 million was added to the reorganisation provision (2018: €12 million). The provision for termination payments/reorganisations totalled €10 million at the end of 2019 (2018: €13 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 2019 amounted to €14 million (2018: €27 million). This €13 million drop concerns the €7 million paid in long-service benefit rights in accordance with the agreements in the new collective labour agreement for Network Operators. It was further agreed in the new collective labour agreement that the paid leave in excess of the statutory minimum over and above the overtime limit will be discontinued. In 2019, employees with leave entitlement in excess of the overtime limit and still in the company’s employ as at 31 December 2019 received a one-off payment for surrendering these rights, which totalled €4 million.