The Group operates various defined benefit plans, of which the largest is in Switzerland.

Overview of employee benefits

(in € million)

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

Salaries and wages accrued

 

35.6

 

26.6

Provision for annual leave

 

9.6

 

8.0

Provision for other employee benefits

 

3.0

 

0.7

Net defined benefit obligations:

 

 

 

 

Pension benefit liabilities

 

123.3

 

108.0

Total employee benefit liabilities

 

171.5

 

143.3

Current

 

45.2

 

34.6

Non-current

 

126.3

 

108.7

Total employee benefit liabilities

 

171.5

 

143.3

The Group has a net defined benefit asset in the amount of €168.4 million as of 31 December 2019 (€129.3 million as of 31 December 2018). It relates to the defined benefit pension plan in Switzerland. The Group’s net defined benefit liabilities relate to defined benefit pensions plans in other countries.

Personnel expenses

Personnel expenses recognised in the statement of profit or loss and other comprehensive income were €320.6 million in the year ended 31 December 2019 and €303.9 million in the year ended 31 December 2018.

Defined benefit pension plans

The Group makes contributions to defined benefit pension plans. It operates defined benefit pension plans in countries including Austria, France, Germany, Indonesia, Switzerland, Taiwan and Thailand. The majority of the Group’s pension obligations are in Switzerland and are subject to governmental regulations relating to the funding of retirement plans. The Group generally funds its retirement plans in an amount equal to the annual minimum funding requirements specified by government regulations covering each plan. It has generally provided aggregated disclosures in respect of these plans on the basis that these plans are not exposed to materially different risks.

The Group’s largest pension plan is the Swiss retirement plan. As of 31 December 2019, the Swiss retirement plan comprises 75% (77% as of 31 December 2018) of the present value of the Group’s pension plan obligations. Therefore, certain information applicable to the Swiss retirement plan has been separately disclosed. As of 31 December 2019, the fair value of the assets of the Swiss retirement plan exceeded the present value of its pension obligations by €168.4 million (€129.3 million as of 31 December 2018). An assessment of the investment strategy of the Swiss retirement plan is performed yearly.

Expected annual contributions to the Group’s defined benefit pension plans during the year ending 31 December 2020 are estimated to be €4.9 million. The Group’s pension plans had a weighted average duration of 13 years as of 31 December 2019 (13 years as of 31 December 2018).

Movement in net defined benefit obligation

Information about the net defined benefit obligation as of and for the year ended 31 December 2019 and the year ended 31 December 2018 is included below.

 

 

Defined benefit obligation

 

Fair value
of plan assets

 

Net defined benefit
liability/(asset)

(In € million)

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

Carrying amount as of the beginning of the year

 

497.0

 

500.2

 

(518.3)

 

(525.1)

 

(21.3)

 

(24.9)

Service cost

 

7.6

 

6.4

 

 

 

7.6

 

6.4

Interest cost/(income)

 

4.7

 

4.0

 

(3.6)

 

(2.9)

 

1.1

 

1.1

Administrative expenses

 

 

 

0.5

 

0.5

 

0.5

 

0.5

Total expense/(income) recognised in profit or loss

 

12.3

 

10.4

 

(3.1)

 

(2.4)

 

9.2

 

8.0

Actuarial (gains)/losses arising from:

 

 

 

 

 

 

 

 

 

 

 

 

Demographic assumptions

 

(2.9)

 

(4.2)

 

 

 

(2.9)

 

(4.2)

Financial assumptions

 

22.9

 

(0.5)

 

 

 

22.9

 

(0.5)

Return on plan assets, excluding interest income

 

 

 

(43.3)

 

9.5

 

(43.3)

 

9.5

Total remeasurement (gains)/losses included in other comprehensive income

 

20.0

 

(4.7)

 

(43.3)

 

9.5

 

(23.3)

 

4.8

Contributions by the Group

 

 

 

(4.4)

 

(4.5)

 

(4.4)

 

(4.5)

Contributions by plan participants

 

1.7

 

1.6

 

(1.7)

 

(1.6)

 

 

Benefits paid by the plans

 

(41.2)

 

(25.2)

 

41.2

 

25.2

 

 

Effect of movements in exchange rates

 

14.7

 

14.7

 

(20.0)

 

(19.4)

 

(5.3)

 

(4.7)

Total other movements

 

(24.8)

 

(8.9)

 

15.1

 

(0.3)

 

(9.7)

 

(9.2)

Carrying amount as of the end of the year

 

504.5

 

497.0

 

(549.6)

 

(518.3)

 

(45.1)

 

(21.3)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprised of:

 

 

 

 

 

 

 

 

 

 

 

 

Swiss retirement plan

 

376.9

 

384.7

 

(545.3)

 

(514.0)

 

(168.4)

 

(129.3)

All other plans

 

127.6

 

112.3

 

(4.3)

 

(4.3)

 

123.3

 

108.0

Carrying amount as of the end of the year

 

504.5

 

497.0

 

(549.6)

 

(518.3)

 

(45.1)

 

(21.3)

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in the statement of financial position as:

 

 

 

 

 

 

 

 

 

 

 

 

Employee benefits (asset)

 

 

 

 

 

 

 

 

 

(168.4)

 

(129.3)

Employee benefits (liability)

 

 

 

 

 

 

 

 

 

123.3

 

108.0

Total net defined pension benefits

 

 

 

 

 

 

 

 

 

(45.1)

 

(21.3)

Expense recognised in profit or loss

The net pension expense is recognised in the following components in the statement of profit or loss and comprehensive income.

(in € million)

 

Year ended
31 Dec. 2019

 

Year ended
31 Dec. 2018

Cost of sales

 

4.7

 

3.6

Selling, marketing and distribution expenses

 

0.9

 

1.2

General and administrative expenses

 

3.6

 

3.2

Total net pension expense

 

9.2

 

8.0

thereof the Swiss retirement plan

 

4.0

 

3.5

Plan assets

(in € million)

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

Equity instruments

 

149.2

 

125.5

Debt instruments

 

216.3

 

213.8

Real estate

 

162.0

 

154.7

Other

 

22.1

 

24.3

Total plan assets

 

549.6

 

518.3

Approximately 99% of total plan assets are held by the Swiss retirement plan as of 31 December 2019 (99% as of 31 December 2018). The debt instruments consist principally of corporate and government bonds. The equity and debt instrument values are based on quoted market prices in active markets. The real estate is held through unlisted funds. The investment policy of the Swiss retirement plan is to target an asset mix of around 25% equity instruments, 45% debt instruments, 25% real estate funds and to hold 5% in cash.

Actuarial assumptions

The amounts recognised under the Group’s defined benefit pension plans are determined using actuarial methods. The actuarial valuations involve assumptions regarding discount rates, expected salary increases and the retirement age of employees. These assumptions are reviewed at least annually and reflect estimates as of the measurement date. Any change in these assumptions will impact the amounts reported in the statement of financial position, plus the net pension expense or income that may be recognised in future years. The mortality table used for the Swiss retirement plan for 2019 and 2018 was BVG 2015 GT.

While the Swiss retirement plan does not provide for compulsory benefit increases for pensioners, increases have been granted from time to time at the discretion of the foundation board, depending on the funding situation at the time.

The assumed discount rate and future salary increases are the assumptions with the most significant effect on the defined benefit obligation. They are presented in the table below.

 

 

Swiss Retirement Plan

 

All plans

(in %)

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

Discount rates

 

0.15%

 

0.70%

 

0.15% - 7.30%

 

0.70% - 8.00%

Future salary increases

 

1.50%

 

1.50%

 

0.00% - 9.00%

 

0.00% - 9.00%

The table below shows the effect on the defined benefit obligation of a change in the discount rate and future salary increases.

 

 

Swiss retirement plan

 

All plans

(in € million)

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

Discount rates

 

 

 

 

 

 

 

 

50 basis points increase

 

(4.2)

 

(1.3)

 

(14.6)

 

(9.4)

50 basis points decrease

 

17.7

 

4.6

 

29.6

 

13.8

Future salary increases

 

 

 

 

 

 

 

 

50 basis points increase

 

1.2

 

1.0

 

2.2

 

1.8

50 basis points decrease

 

(1.1)

 

(1.0)

 

(2.1)

 

(1.7)

A 50 basis points decrease of the discount rate for the Swiss retirement plan would result in a negative discount rate, which explains the increased sensitivity to downward changes in discount rates.

Accounting policy

Short-term employee benefits

Short-term employee benefits are expensed in profit or loss as the related services are provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans and outstanding annual leave balances if the Group has a present legal or constructive obligation to pay this amount as a result of past services provided by the employee and the obligation can be estimated reliably.

Pension obligations

The Group operates various defined benefit pension plans. The Group’s obligation with respect to defined benefit plans is calculated separately for each plan by estimating the amount of the future benefits to which employees are entitled in return for their services in the current and prior years, discounting that amount to determine the present value of the Group’s obligation and then deducting the fair value of any plan assets. The discount rate used is the yield on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have maturity dates approximating the terms of the Group’s obligations. The calculations are performed annually by qualified actuaries using the projected unit credit method. When the calculation results in a potential asset for the Group (such as for the Group’s Swiss retirement plan), the recognised asset is limited to the present value of economic benefits available in the form of reductions in future contributions to the plan (the case for the Swiss retirement plan) or any future refunds from the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and, if any, the effects of the asset ceiling (excluding interest) are recognised immediately in other comprehensive income.

The net interest expense/(income) on the net defined benefit liability/(asset) for the period is determined by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined liability/(asset) as of that time, taking into account any changes from contributions and benefit payments. Net interest expense and other plan expenses are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past services or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

Termination benefits

Termination benefits, when applicable, are payable when employment is terminated by the Group before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for such benefits. Termination costs are expensed when the Group can no longer withdraw the offer of the benefits or when the Group recognises any related restructuring costs, whichever occurs earlier.

Significant judgements and estimates

Amounts recognised under the Group’s defined benefit pension plans are determined using actuarial methods. These actuarial valuations involve various assumptions that reflect estimates as of the measurement date. See the section “Actuarial assumptions” above for an overview of the impact of any change in these assumptions.