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Payroll, staff and employee benefits obligations
12 Months Ended
Dec. 31, 2020
Payroll, staff and employee benefits obligations  
Payroll, staff and employee benefits obligations

NOTE 10 Payroll, staff and employee benefits obligations

10.1 Employee benefits obligations

Accounting principles

In accordance with the laws and practices of each country, the Group participates in employee benefit plans offering retirement, death and disability, healthcare and special termination benefits. These plans provide benefits based on various factors such as length of service, salaries, and contributions made to the governmental bodies responsible for the payment of benefits.

These plans can be either defined contribution or defined benefit pension plans and may be entirely or partially funded with investments made in various non-Group instruments such as mutual funds, insurance contracts, and other instruments.

For defined contribution plans, expenses correspond to the contributions paid.

Defined benefit obligations are determined according to the Projected Unit Method. Actuarial gains and losses may arise from differences between actuarial valuation and projected commitments (depending on new calculations or assumptions) and between projected and actual return of plan assets. Such gains and losses are recognized in the statement of comprehensive income, with no possibility to subsequently recycle them to the income statement.

The past service cost is recorded immediately in the statement of income, whether vested or unvested.

The net periodic pension cost is recognized under “Other operating expenses”.

Liabilities for employee benefits obligations consist of the following:

As of December 31,

    

    

    

(M$)

2020

2019

2018

Pension benefits liabilities

 

3,111

 

2,651

 

2,545

Other benefits liabilities

 

700

 

742

 

669

Restructuring reserves (early retirement plans)

 

106

 

108

 

149

TOTAL

 

3,917

 

3,501

 

3,363

Net liabilities relating to assets held for sale

 

1

 

 

Description of plans and risk management

The Group operates, for the benefit of its current and former employees, both defined benefit plans and defined contribution plans.

The Group recognized a charge of $135 million for defined contribution plans in 2020 ($133 million in 2019 and $130 million in 2018).

The Group’s main defined benefit pension plans are located in France, the United Kingdom, the United States, Belgium and Germany. Their main characteristics, depending on the country-specific regulatory environment, are the following:

-the benefits are usually based on the final salary and seniority;
-they are usually funded (pension fund or insurer);
-they are usually closed to new employees who benefit from defined contribution pension plans;
-they are paid in annuity or in lump sum.

The pension benefits include also termination indemnities and early retirement benefits. The other benefits are employer contributions to post-employment medical care.

In order to manage the inherent risks, the Group has implemented a dedicated governance framework to ensure the supervision of the different plans. These governance rules provide for:

-the Group’s representation in key governance bodies or monitoring committees;
-the principles of the funding policy;
-the general investment policy, including for most plans:
-the establishment of a monitoring committee to define and follow the investment strategy and performance,
-the principles in respect of investment allocation are respected;
-a procedure to approve the establishment of new plans or the amendment of existing plans;
-the principles of administration, communication and reporting.

Change in benefit obligations and plan assets

The fair value of the defined benefit obligation and plan assets in the Consolidated Financial Statements is detailed as follows:

As of December 31,

Pension benefits

Other benefits

(M$)

    

2020

    

2019

    

2018

  

2020

    

2019

    

2018

Change in benefit obligation

  

  

  

  

  

  

Benefit obligation at beginning of year

 

12,285

 

11,501

 

12,872

 

742

 

669

 

705

Current service cost

 

244

 

214

 

236

 

19

 

13

 

14

Interest cost

 

217

 

295

 

296

 

11

 

17

 

17

Past service cost

 

 

4

 

(1)

 

 

 

(2)

Settlements

 

(10)

 

(20)

 

(141)

 

(3)

 

(9)

 

Plan participants' contributions

 

10

 

7

 

8

 

 

 

Benefits paid

 

(702)

 

(667)

 

(902)

 

(27)

 

(26)

 

(28)

Actuarial losses / (gains)

 

818

 

847

 

(372)

 

(89)

 

87

 

(29)

Foreign currency translation and other

 

729

 

104

 

(495)

 

47

 

(9)

 

(8)

Benefit obligation at year-end

 

13,591

 

12,285

 

11,501

 

700

 

742

 

669

Of which plans entirely or partially funded

 

12,830

 

11,584

 

10,864

 

 

 

Of which plans not funded

 

761

 

701

 

637

 

700

 

742

 

669

Change in fair value of plan assets

 

 

 

  

 

 

 

  

Fair value of plan assets at beginning of year

 

(9,769)

 

(9,145)

 

(10,205)

 

 

 

Interest income

 

(191)

 

(255)

 

(261)

 

 

 

Actuarial losses / (gains)

 

(517)

 

(745)

 

424

 

 

 

Settlements

 

2

 

11

 

129

 

 

 

Plan participants’ contributions

 

(10)

 

(7)

 

(8)

 

 

 

Employer contributions

 

(229)

 

(172)

 

(417)

 

 

 

Benefits paid

 

622

 

573

 

778

 

 

 

Foreign currency translation and other

 

(488)

 

(29)

 

415

 

 

 

Fair value of plan assets at year-end

 

(10,580)

 

(9,769)

 

(9,145)

 

 

 

UNFUNDED STATUS

 

3,011

 

2,516

 

2,356

 

700

 

742

 

669

Asset ceiling

 

36

 

34

 

28

 

 

 

NET RECOGNIZED AMOUNT

 

3,047

 

2,550

 

2,384

 

700

 

742

 

669

Pension benefits and other benefits liabilities

 

3,111

 

2,651

 

2,545

 

700

 

742

 

669

Other non-current assets

 

(65)

 

(101)

 

(161)

 

 

 

Net benefit liabilities relating to assets held for sale

 

1

 

 

 

 

 

As of December 31, 2020, the contribution from the main geographical areas for the net pension liability in the balance sheet is: 69% for the Euro area, 15% for the United Kingdom and 12% for the United States.

The amounts recognized in the consolidated income statement and the consolidated statement of comprehensive income for defined benefit plans are detailed as follows:

For the year ended December 31,

Pension benefits

Other benefits

(M$)

    

2020

    

2019

    

2018

  

2020

    

2019

    

2018

Current service cost

244

214

236

19

13

14

Past service cost

 

 

4

 

(1)

 

 

 

(2)

Settlements

 

(7)

 

(10)

 

(12)

 

(3)

 

(9)

 

Net interest cost

 

25

 

39

 

35

 

11

 

17

 

17

Benefit amounts recognized on Profit & Loss

 

262

 

247

 

258

 

27

 

21

 

29

- Actuarial (Gains) / Losses

 

 

  

 

  

 

 

  

 

  

* Effect of changes in demographic assumptions

 

(12)

 

(166)

 

(1)

 

(3)

 

(2)

 

(21)

* Effect of changes in financial assumptions

 

773

 

1,071

 

(354)

 

(1)

 

89

 

(3)

* Effect of experience adjustments

 

57

 

(59)

 

(17)

 

(85)

 

 

(5)

* Actual return on plan assets

 

(517)

 

(745)

 

424

 

 

 

- Effect of asset ceiling

 

 

3

 

(11)

 

 

 

Benefit amounts recognized on Equity

 

301

 

104

 

41

 

(89)

 

87

 

(29)

TOTAL BENEFIT AMOUNTS RECOGNIZED ON COMPREHENSIVE INCOME

 

563

 

351

 

299

 

(62)

 

108

 

Expected future cash outflows

The average duration of accrued benefits is approximately 14 years for defined pension benefits and 17 years for other benefits. The Group expects to pay contributions of $228 million in respect of funded pension plans in 2021.

Estimated future benefits either financed from plan assets or directly paid by the employer are detailed as follows:

Estimated future payments

(M$)

    

Pension benefits

    

Other benefits

2021

 

874

 

37

2022

 

502

 

29

2023

 

426

 

28

2024

 

405

 

26

2025

 

392

 

26

2026-2030

 

2,243

 

130

Type of assets

Asset allocation

Pension benefits

 

As of December 31,

    

2020

    

2019

    

2018

Equity securities

 

25%

25%

24%

Debt securities

 

45%

46%

47%

Monetary

 

2%

1%

1%

Annuity contracts

 

20%

20%

20%

Real estate

 

8%

8%

8%

Investments on equity and debt markets are quoted on active markets.

Main actuarial assumptions and sensitivity analysis

Assumptions used to determine benefits obligations

Pension benefits

Other benefits

 

As of December 31,

    

2020

    

2019

    

2018

    

2020

    

2019

    

2018

    

Discount rate (weighted average for all regions)

 

1.28%

1.84%

2.68%

1.41%

1.71%

2.56%

Of which Euro zone

 

0.52%

0.73%

1.72%

0.68%

0.94%

1.87%

Of which United States

 

2.50%

3.25%

4.00%

2.50%

3.25%

4.00%

Of which United Kingdom

 

1.50%

2.25%

3.00%

-

-

-

 

Inflation rate (weighted average for all regions)

 

2.06%

2.20%

2.44%

-

-

-

 

Of which Euro zone

 

1.24%

1.21%

1.50%

-

-

-

 

Of which United States

 

2.50%

2.50%

2.50%

-

-

-

 

Of which United Kingdom

 

3.00%

3.25%

3.50%

-

-

-

 

The discount rate retained is determined by reference to the high quality rates for AA-rated corporate bonds for a duration equivalent to that of the obligations. It derives from a benchmark per monetary area of different market data at the closing date.

Sensitivity to inflation in respect of defined benefit pension plans is not material in the United States.

A 0.5% increase or decrease in discount rates – all other things being equal - would have the following approximate impact on the benefit obligation:

(M$)

    

0.5% Increase

    

0.5% Decrease

Benefit obligation as of December 31, 2020

 

(908)

 

1,001

A 0.5% increase or decrease in inflation rates – all other things being equal - would have the following approximate impact on the benefit obligation:

(M$)

    

0.5% Increase

    

0.5% Decrease

Benefit obligation as of December 31, 2020

 

613

 

(568)

10.2 Payroll and staff

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For the year ended December 31,

    

2020

    

2019

    

2018

Personnel expenses (M$)

 

 

 

  

Wages and salaries (including social charges)

 

8,908

 

8,922

 

9,099

Group employees at December 31,

 

 

 

  

France (DROM COM includ.)

 

 

 

  

● Management

 

14,016

 

13,848

 

13,484

● Other

 

21,886

 

22,831

 

22,929

International

 

 

 

  

● Management

 

17,102

 

16,821

 

16,856

● Other

 

52,472

 

54,276

 

51,191

TOTAL

 

105,476

 

107,776

 

104,460

The number of employees includes only employees of fully consolidated subsidiaries.

2019 and 2018 data were restated to show number of employees of France including DROM COM (overseas departments, regions and communities).