The Group operates pension, early retirement and other employee benefit schemes depending on local legislation and regulations.
For obligatory state schemes and other defined-contribution schemes, the Group recognises in the income statement contributions payable when they are due. No provision has been set aside in this respect as the Group’s obligation does not exceed the amount of contributions paid.
The characteristics of the defined benefit schemes in force within the Group are as follows:
The charges recorded in the income statement during the year include:
The latter two items represent the interest component of the pension costs. The interest component is shown within Net financial income on the Other financial income and expenses item.
To determine the discounted value of the obligation for each scheme, the Group applies an actuarial valuation method based on the final salary (projected unit credit method). The obligations and the fair value of plan assets are assessed each year using length-of-service, life expectancy, staff turnover by category and economic assumptions (such as inflation rate and discount rate).
The Group applies a simplified granular approach to calculate its service cost for the period. Under this simplified approach, two different discount rates are used to calculate the obligation and the service cost based on the duration of the future cash flows relating to each of these items. Financial costs are calculated by applying the discount rate used for the obligation to plan assets and by applying the differential interest rate to service cost for the period.
Actuarial gains and losses arising on post-employment defined benefit obligations are recognised in equity. Actuarial gains and losses in relation to other benefits such as jubilee awards and long-serve bonuses are immediately charged to the income statement.
The liability corresponding to the Company’s net defined benefit obligation regarding its employees is recorded in the balance sheet on the Provisions for employee retirement obligations and related benefits line.
The actuarial assumptions used to calculate these obligations take into account the economic conditions specific to each country or Group company. The main weighted average assumptions for the Group are as follows:
In % | 31.12.2021 | 31.12.2020 | 31.12.2019 |
---|---|---|---|
Discount rate (commitment) |
Discount rate (commitment) 31.12.2021 1.6% |
Discount rate (commitment) 31.12.2020 1.1% |
Discount rate (commitment) 31.12.2019 1.6% |
Discount rate (service cost)* |
Discount rate (service cost) *31.12.2021 1.8% |
Discount rate (service cost) *31.12.2020 1.4% |
Discount rate (service cost) *31.12.2019 1.9% |
Salary increases |
Salary increases 31.12.2021 3.6% |
Salary increases 31.12.2020 3.4% |
Salary increases 31.12.2019 3.5% |
* Used for the services cost for the following financial year.
31.12.2021 | 31.12.2020 | 31.12.2019 | |||||||
---|---|---|---|---|---|---|---|---|---|
Initial rate | Final rate | Application of final rate | Initial rate | Final rate | Application of final rate | Initial rate | Final rate | Application of final rate | |
Expected rate of health care inflation | 5.3% | 4.2% | 2027 | 5.3% | 4.2% | 2027 | 5.7% | 4.2% | 2027 |
The discount rates are obtained by reference to market yields on high quality corporate bonds having maturity dates equivalent to those of the obligations.
Bond quality is assessed by reference to the AA-/Aa3 minimum rating provided by one of the three main credit-rating agencies.