36. Employee benefits - €3,771 million

 

The Group provides its employees with a variety of benefits, including deferred compensation benefits, additional months’ pay for having reached age limits or eligibility for old-age pension, loyalty bonuses for achievement of seniority milestones, supplemental retirement and healthcare plans, residential electricity discounts and similar benefits. More specifically:

  • for Italy, the item “pension benefits” regards estimated accruals made to cover benefits due under the supplemental retirement schemes of retired executives and the benefits due to personnel under law or contract at the time the employment relationship is terminated. For the foreign companies, the item reports post-employment benefits, of which the most material regard the pension benefit schemes of Endesa in Spain, which break down into three types that differ on the basis of employee seniority and company. In general, under the framework agreement of October 25, 2000, employees participate in a specific defined-contribution pension plan and, in cases of disability or death of employees in service, a defined benefit plan which is covered by appropriate insurance policies. In addition, the group has two other limited-enrollment plans (i) for current and retired Endesa employees covered by the electricity industry collective bargaining agreement prior to the changes introduced with the framework agreement noted earlier and (ii) for employees of the former Catalan companies (Fecsa/Enher/HidroEmpordà). Both are defined benefit plans and benefits are fully ensured, with the exception of the former plan for benefits in the event of the death of a retired employee. Finally, the Brazilian companies have also established defined benefit plans; 
  • the item “electricity discount” comprises benefits regarding electricity supply associated with foreign companies. For Italy, that benefit, which was granted until the end of 2015 to retired employees only, was unilaterally cancelled; 
  • the item “health insurance” reports benefits for current or retired employees covering medical expenses; 
  • “other benefits” mainly regard the loyalty bonus, which is adopted in various countries and for Italy is represented by the estimated liability for the benefit entitling employees covered by the electricity workers national collective bargaining agreement to a bonus for achievement of seniority milestones (25th and 35th year of service). It also includes other incentive plans, which provide for the award to certain Company managers of a monetary bonus subject to specified conditions. 

The following table reports changes in the defined benefit obligation for post-employment and other long-term employee benefits at December 31, 2019, and December 31, 2018, respectively, as well as a reconciliation of that obligation with the actuarial liability.

   

Millions of euro

2019

2018

 

Pension benefits

Electricity discount

Health insurance

Other benefits

Total

Pension benefits

Electricity discount

Health insurance

Other benefits

Total

CHANGES IN ACTUARIAL OBLIGATION

          

Actuarial obligation at the start of the year

5,072

767

253

231

6,323

2,413

739

253

254

3,659

Current service cost

20

4

4

32

60

16

4

5

36

61

Interest expense

335

15

10

5

365

247

14

10

5

276

Actuarial (gains)/losses arising from changes in demographic assumptions

(16)

-

1

-

(15)

(2)

-

-

-

(2)

Actuarial (gains)/losses arising from changes in financial assumptions

701

91

15

8

815

213

(10)

4

(5)

202

Experience adjustments

94

55

(4)

13

158

21

48

2

7

78

Past service cost

(8)

-

-

2

(6)

(1)

-

-

7

6

(Gains)/losses arising from settlements

-

-

-

-

-

-

-

-

-

-

Exchange differences

(84)

-

(2)

1

(85)

(114)

(1)

(9)

(6)

(130)

Employer contributions

-

-

-

-

-

-

-

-

-

-

Employee contributions

2

-

-

-

2

2

-

-

-

2

Benefits paid

(431)

(31)

(14)

(45)

(521)

(370)

(30)

(12)

(65)

(477)

Other changes

6

3

-

(5)

4

2,647

3

-

(2)

2,648

Liabilities classified as held for sale

-

-

-

-

-

-

-

-

-

-

Actuarial obligation at year end (A)

5,691

904

263

242

7,100

5,072

767

253

231

6,323

CHANGES IN PLAN ASSETS

          

Fair value of plan assets the start of the year

3,160

-

-

-

3,160

1,317

-

-

-

1,317

Interest income

235

-

-

-

235

173

-

-

-

173

Expected return on plan assets excluding amounts included in interest income

272

-

-

-

272

70

-

-

-

70

Exchange differences

(50)

-

-

-

(50)

(82)

-

-

-

(82)

Employer contributions

186

31

14

16

247

171

30

12

24

237

Employee contributions

2

-

-

-

2

2

-

-

-

2

Benefits paid

(431)

(31)

(14)

(16)

(492)

(370)

(30)

(12)

(24)

(436)

Other payments

-

-

-

 

-

-

-

 

-

-

Changes in the scope of consolidation

-

-

-

-

-

1,879

-

-

-

1,879

Fair value of plan assets at year-end (B)

3,374

-

-

-

3,374

3,160

-

-

-

3,160

EFFECT OF ASSET CEILING

          

Asset ceiling at the start of the year

24

-

-

-

24

64

-

-

-

64

Interest income

2

-

-

-

2

4

-

-

-

4

Changes in asset ceiling

20

-

-

-

20

(38)

-

-

-

(38)

Exchange differences

(1)

-

-

-

(1)

(6)

-

-

-

(6)

Changes in the scope of consolidation

-

-

-

 

-

-

 

-

-

-

Asset ceiling at year end (C)

45

-

-

-

45

24

-

-

-

24

Net liability in balance sheet (A-B+C)

2,362

904

263

242

3,771

1,936

767

253

231

3,187

     

Millions of euro

  
 

2019

2018

(Gains)/Losses charged to profit or loss

  

Service cost and past service cost

32

39

Net interest expense

129

107

(Gains)/losses arising from settlements

-

-

Actuarial (gains)/losses on other long-term benefits

25

28

Other changes

-

(4)

Total

186

170

   

Millions of euro

  
 

2019

2018

Change in (gains)/losses in OCI

  

Expected return on plan assets excluding amounts included in interest income

(272)

(70)

Actuarial (gains)/losses on defined benefit plans

958

282

Changes in asset ceiling excluding amounts included in interest income

20

(38)

Other changes

(4)

(2)

Total

702

172

The change in cost recognized through profit or loss was equal to €16 million. The impact on the income statement is, therefore, greater than in 2018, due mainly to the effect of interest on pension funds for Enel Distribuição São Paulo in Brazil. The liability recognized in the balance sheet at the end of the year is reported net of the fair value of plan assets, amounting to €3,374 million at December 31, 2019. Those assets, which are entirely in Spain and Brazil, break down as follows.

 

 

2019

2018

Investments quoted in active markets

  

Equity instruments

8%

8%

Fixed-income securities

68%

65%

Investment property

3%

4%

Other

-

-

Unquoted investments

  

Assets held by insurance undertakings

-

-

Other

21%

23%

Total

100%

100%

   

The main actuarial assumptions used to calculate the liabilities in respect of employee benefits and the plan assets, which are consistent with those used the previous year, are set out in the following table.

       

 

Italy

Iberia

Latin America

Other countries

Italy

Iberia

Latin America

Other countries

 

2019

2018

Discount rate

0.00%-0.70%

0.00%-1.14%

3.40%-7.59%

1.20%-6.45%

0.25%-1.50%

0.21%-1.75%

4.70%-9.15%

1.50%-8.77%

Inflation rate

0.70%

2.00%

3.00%-8.00%

1.00%-3.94%

1.50%

2.00%

3.00%-4.00%

1.50%-4.14%

Rate of wage increases

0.70%-1.70%

2.00%

3.80%-8.00%

2.50%-3.94%

0.025%

2.00%

3.80%-5.00%

3.00%-4.20%

Rate of increase in healthcare costs

1.70%

3.20%

7.12%-8.00%

-

2.50%

3.20%

7.12%-8.00%

-

Expected rate of return on plan assets

-

1.09%

6.44%-7.38%

-

-

1.75%

8.63%-9.04%

-

The following table reports the outcome of a sensitivity analysis that demonstrates the effects on the defined benefit obligation of changes reasonably possible at the end of the year in the actuarial assumptions used in estimating the obligation.

 

 

Pension benefits

Electricity discount

Health insurance

Other benefits

Pension benefits

Electricity discount

Health insurance

Other benefits

 

at Dec. 31, 2019

at Dec. 31, 2018

Decrease of 0.5% in discount rate

321

78

15

5

280

63

9

3

Increase of 0.5% in discount rate

(285)

(73)

(19)

(7)

(243)

(59)

(12)

(9)

Increase of 0.5% in inflation rate

(2)

(74)

(5)

(3)

(5)

(59)

(3)

(6)

Decrease of 0.5% in inflation rate

31

79

10

1

32

61

3

2

Increase of 0.5% in remuneration

19

2

(2)

5

10

(2)

(3)

1

Increase of 0.5% in pensions currently being paid

9

(2)

(3)

(1)

11

(2)

(3)

(3)

Increase of 1% healthcare costs

-

-

12

-

-

-

32

-

Increase of 1 year in life expectancy of active and retired employees

179

36

19

(1)

155

25

8

(3)

The sensitivity analysis used an approach that extrapolates the effect on the defined benefit obligation of reasonable changes in an individual actuarial assumption, leaving the other assumptions unchanged.

The contributions expected to be paid into defined benefit plans in the subsequent year amount to €177 million.

The following table reports expected benefit payments in the coming years for defined benefit plans.

Millions of euro

  
 

at Dec. 31, 2019

at Dec. 31, 2018

Within 1 year

461

436

In 1-2 years

447

429

In 2-5 years

1,288

1,273

More than 5 years

2,040

2,017