(27) Employee Benefit Obligations

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in TEUR, at 31 December

2014

2013

Service awards

71,893

64,373

Severance

121,588

92,934

Pensions

6,812

6,138

Other

622

887

Long-term employee benefit obligations

200,916

164,332

Actuarial assumptions

The actuarial assumptions used to measure the obligations for service awards, severance payments and pensions are as follows:

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2014

2013

*

Depending on years of service.

Discount rate

2.0%

3.5%

Rate of compensation increase – civil servants

5.5%

5.5%

Rate of compensation increase – other employees

3.1%

3.1%

Rate of compensation increase – civil servants released from work

4.5%

5.0%

Rate of increase of pensions

1.6%

1.6%

Employee turnover rate*

0.0%–2.01%

0.0%–2.14%

As last year, the determination of the discount rate is based on the Mercer Yield Curve Approach taking into account the respective maturities.

Life expectancy in Austria is based on “AVÖ 2008-P – Rechnungsgrundlagen für die Pensionsversicherung – Pagler & Pagler“. The obligation relating to the international subsidiaries was measured by the same actuarial basis due to their insignificant amount.

Service awards

Civil servants and certain employees (together “employees”) are eligible to receive service awards. Under these plans, eligible employees receive a cash bonus of two months’ salary after 25 years of service and four months’ salary after 40 years of service. Employees with at least 35 years of service when retiring (at the age of 65) or who are retiring based on a specific legal regulation are eligible to receive four monthly salaries. The compensation is accrued as earned over the period of service, taking into account the employee turnover rate.

The following table provides the components and a reconciliation of the changes in the provisions for service awards:

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in TEUR

2014

2013

At 1 January

70,652

71,825

Service cost

2,328

2,731

Interest cost

2,379

2,444

Actuarial gain/loss based on experience adjustment

635

−1,159

Actuarial gain/loss from changes in demographic assumptions

−5

93

Actuarial gain/loss from changes in financial assumptions

7,444

0

Recognised in profit or loss

12,780

4,109

Benefits paid

−5,940

−5,280

Foreign currency adjustments

−1

−2

Other

−5,941

−5,282

Obligation at 31 December

77,491

70,652

Less short-term portion

−5,598

−6,280

Non-current obligation

71,893

64,373

Of the defined benefit obligations for service awards, less than 1% relate to foreign subsidiaries as of 31 December 2014 and 2013, respectively.

As of 31 December 2014 and 2013, the weighted average duration of the obligation for service awards amounted to 7.3 and 7.1 years, respectively.

Severance

Employees starting to work for Telekom Austria Group in Austria on or after 1 January 2003 are covered by a defined contribution plan. Telekom Austria Group paid TEUR 1,917 and TEUR 1,776 (1.53% of the salary) into this defined contribution plan (BAWAG Allianz Mitarbeitervorsorgekasse AG) in 2014 and 2013, respectively.

Severance benefit obligations for employees hired before 1 January 2003 are covered by defined benefit plans. Upon termination by Telekom Austria Group or retirement, eligible employees receive severance payments equal to a multiple of their monthly compensation which comprises fixed compensation plus variable elements such as overtime or bonuses. Maximum severance is equal to a multiple of twelve times the eligible monthly compensation. Up to three months of benefits are paid upon termination, with any benefit in excess of that amount being paid in monthly instalments over a period not exceeding ten months. In case of death, the heirs of eligible employees receive 50% of the severance benefits.

The following table provides a detailed reconciliation of the changes in severance benefit obligations:

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in TEUR

2014

2013

At 1 January

94,170

90,740

Service cost

4,864

5,230

Interest cost

3,240

3,138

Included in Profit or Loss

8,104

8,368

Actuarial gain/loss based on experience adjustment

129

−533

Actuarial gain/loss from changes in demographic assumptions

−1,807

−1,263

Actuarial gain/loss from changes in financial assumptions

26,688

415

Recognised in other comprehensive income

25,011

−1,381

Benefits paid

−4,175

−3,561

Change in reporting entities

0

7

Foreign currency adjustments

−18

−3

Other

−4,193

−3,557

Obligation at 31 December

123,091

94,170

Less short-term portion

−1,503

−1,236

Non-current obligation

121,588

92,934

Approximately 3% of the defined benefit obligations for severance relate to foreign subsidiaries as of 31 December 2014 and 2013.

As of 31 December 2014 and 2013, the weighted average duration of the severance benefit obligations was 16.7 and 16.3 years, respectively.

Pensions

Defined contribution pension plans

In Austria, pension benefits generally are provided by the social security system for employees and by the government for civil servants. Telekom Austria Group is required to assist in funding the Austrian government’s pension and health care obligations to Telekom Austria Group’s current and former civil servants and their surviving dependents. In 2014 and 2013, the rate of contribution for active civil servants amounted to a maximum of 28.3% depending on the age of the civil servant. 15.75% are borne by Telekom Austria Group and the remaining portion is contributed by the civil servants. Contributions to the government, net of the share contributed by civil servants, amounted to TEUR 42,281 and TEUR 43,221 in 2014 and 2013, respectively.

Additionally, Telekom Austria Group sponsors a defined contribution plan for employees of some of its Austrian subsidiaries. Telekom Austria Group’s contributions to this plan are based on a percentage of the compensation not exceeding 5%. The annual expenses for this plan amounted to TEUR 13,283 and TEUR 12,911 in 2014 and 2013, respectively.

Defined benefit pension plans

Telekom Austria Group provides defined benefits for certain former employees in Austria. All such employees are retired and were employed prior to 1 January 1975. This unfunded plan provides benefits based on a percentage of salary and years employed, not exceeding 80% of the salary before retirement, and taking into consideration the pension provided by the social security system.

Other

Other employee benefit obligations relate substantially to a retention loyalty programme for key players in Bulgaria.

The following table provides a detailed reconciliation of the changes in pension benefit obligations:

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in TEUR

2014

2013

At 1 January

6,836

7,296

Interest cost

227

242

Recognised in profit or loss

227

242

Actuarial gain/loss based on experience adjustment

205

15

Actuarial gain/loss from changes in financial assumptions

909

0

Recognised in other comprehensive income

1,114

15

Benefits paid

−683

−717

Obligation at 31 December

7,494

6,836

Less short-term portion

−681

−697

Non-current obligation

6,812

6,138

As of 31 December 2014 and 2013, the weighted average duration of the pension benefit obligations was 9.6 and 8.1 years, respectively.

Sensitivity analysis

The following table summarises the short- and long-term provisions recorded:

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in TEUR, at 31 December

2014

2013

Service awards

77,491

70,652

Severance

123,091

94,170

Pensions

7,494

6,836

A change in the discount rate of half a percentage point would lead to the following changes in provisions (negative values indicate a reduction in provisions):

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in TEUR, at 31 December 2014

0.5 percentage points decrease

0.5 percentage points increase

Service awards

2,878

−2,727

Severance

10,888

−9,817

Pensions

357

−328

 

 

 

in TEUR, at 31 December 2013

 

 

Service awards

2,677

−2,404

Severance

8,125

−7,321

Pensions

294

−272

A change in the rate of compensation of one percentage point would lead to the following changes in provisions (negative values indicate a reduction in provisions):

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in TEUR, at 31 December 2014

1 percentage point decrease

1 percentage point increase

Service awards

−5,174

5,635

Severance

−18,647

22,448

Pensions

−638

742

 

 

 

in TEUR, at 31 December 2013

 

 

Service awards

−4,681

5,255

Severance

−14,109

16,998

Pensions

−509

586

A change in the employee turnover rate of half a percentage point would lead to the following changes in provisions (negative values indicate a reduction in provisions):

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in TEUR, at 31 December 2014

0.5 percentage points decrease

0.5 percentage points increase

No employee turnover rate is applied to the calculation of the provision for pensions as all eligible employees are already retired.

Service awards

74

−2,846

Severance

3,547

−5,704

 

 

 

in TEUR, at 31 December 2013

 

 

Service awards

149

−2,542

Severance

944

−3,857

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