29. Employee benefit obligations

A A A
PLN ’000 Dec 31 2013 Dec 31 2012
Non-current obligations    
Post-employment benefits 32,741 26,286
Length-of-service awards and other benefits 118,684 103,576
Total 151,425 129,862
Current obligations    
Post-employment benefits 3,869 6,201
Length-of-service awards and other benefits 11,966 9,553
Bonuses. awards and unused holidays 72,339 78,619
Salaries and wages payable 16,883 16,557
Total 105,057 110,930
Total obligations 256,482 240,792

29.1 Obligations under length-of-service awards and post-employment benefits

In accordance with the Group’s remuneration systems, the Group employees are entitled to post-employment benefits upon retirement. Length-of-service awards are paid after a specific period of employment. Therefore, based on valuations prepared by professional actuary firms or based on own estimates, the Group recognises the present value of obligations under length-of-service awards and post-employment benefits. The table below provides information on the amount of the obligations and reconciliation of changes in the obligations during the reporting period.

PLN ’000 Note Post-employment benefits Length-of-service awards
and other benefits
Total
Jan 1 2013   32,018 113,129 145,147
Current service cost   1,804 17,277 19,081
Cost of discount 9.6 1,158 4,980 6,138
Past service cost   (152) (793) (945)
Benefits paid   (2,206) (11,236) (13,442)
Actuarial (gain)/loss
under profit or loss
  - 7,680 7,680
Actuarial (gain)/loss
under profit or loss
  225 - 225
Dec 31 2013   32,847 131,037 163,884
including:        
non-current   29,132 119,033 148,165
current   3,715 12,004 15,719
Obligations under length-of-service awards and post-employment benefits at foreign companies (1)   3,802 - 3,802
Deconsolidation
(LOTOS Tank Sp. z o.o.)
  (39) (387) (426)
Dec 31 2013   36,610 130,650 167,260
including:        
non-current   32,741 118,684 151,425
current   3,869 11,966 15,835
PLN ’000 Note Post-employment benefits Length-of-service awards
and other benefits
Total
Jan 1 2012   34,271 99,903 134,174
Current service cost   1,918 7,430 9,348
Cost of discount 9.6 1,560 4,984 6,544
Past service cost   (3,879) 11,972 8,093
Acquisition/(disposal) of related entities   (713) (2,763) (3,476)
Benefits paid   (2,312) (11,177) (13,489)
Actuarial (gain)/loss under profit or loss   - 2,780 2,780
Actuarial (gain)/loss under other comprehensive income   1,173 - 1,173
Dec 31 2012   32,018 113,129 145,147
including:        
non-current   25,817 103,576 129,393
current   6,201 9,553 15,754
Obligations under length-of-service awards and post-employment benefits at foreign companies (1)   469 - 469
Dec 31 2012   32,487 113,129 145,616
including:        
non-current   26,286 103,576 129,862
current   6,201 9,553 15,754

(1) Given the different nature of pension plans operated by the Group's foreign companies – LOTOS Exploration and Production Norge AS and the companies of the AB LOTOS Geonafta Group – and their negligible effect on the Group's obligations under length-of-service awards and post-employment benefits, such companies' obligations are presented separately as Obligations under length-of-service awards and post-employment benefits at foreign companies.

29.2 Present value of future employee benefit obligations

(PLN ’000) Present value of future employee benefit obligations
Dec 31 2013 167,260
Dec 31 2012 145,616
Dec 31 2011 131,801
Dec 31 2010 107,829
Dec 31 2009 98,694

Present value of future employee benefit obligations is equal to their carrying amount.

29.3 Total cost of future employee benefit payments charged to profit or loss

(PLN ’000) Note for the year ended
Dec 31 2013
for the year ended
Dec 31 2012
Items recognised in profit or loss:      
Current service cost   19,081 9,348
Cost of discount 9.6 6,138 6,544
Past service cost   (945) 8,093
Effect of foreign operati   3,639 (78)
Actuarial (gain)/loss   7,680 2,780
Total   35,593 26,687
Items recognised in other comprehensive income:      
Actuarial (gain)/loss   188 1,111
Total   35,781 27,798

29.4 Actuarial assumptions

The table below presents the key assumptions adopted by the actuary as at the balance-sheet date to calculate the amount of the obligation.

  Dec 31 2013 Dec 31 2012
Stopa dyskontowa (%) 4.30% 4.50%
Przewidywany wskaźnik inflacji (%) 2.50% 2.50%
Wskaźnik rotacji pracowników (%) 2.49% 2.60%
Przewidywana stopa wzrostu wynagrodzeń w kolejnym roku (%) 0.00% 2.70%
Przewidywana stopa wzrostu wynagrodzeń w latach następnych (%) 2.76% 2.70%
  • The employee attrition probability is based on the historical data on employee turnover at the Group and statistical data on employee attrition in the industry. The employee turnover ratios adopted by the actuary were determined separately for men and women and broken down into nine age categories. The employee turnover ratio is now calculated on an average basis.
  • The mortality and life expectancy ratios were based on the Life Expectancy Tables of Poland for 2012, published by the Polish Central Statistics Office (GUS), and assume that the Group’s employee population is representative of the average Polish population in terms of mortality (December 31st 2012: Life Expectancy Tables of Poland for 2011).
  • The changes resulting from amendments to the Act on Pensions and Disability Pensions from Social Security Fund (Pensions Act) were accounted for, in particular changes relating to the retirement age of women and men, including its extension over a defined period to 67 years for both women and men. The amendments to the Pensions Act resulted in a change in the operation of individual benefit plans, giving rise to additional past service costs.
  • It was assumed that employees would retire in accordance with the standard procedure, as prescribed by the Pensions Act, with the exception of employees who, according to the information provided by the Company, meet the conditions for early retirement entitlement.
  • Based on the historical data, it was assumed that in 60% of cases half of the full amount of death benefits is paid.
  • The data used in the assumptions did not include cases related to organisational changes.
  • Additionally, the provision for death benefits as at December 31st 2012 was revaluated. The effect of this revaluation is presented in Note 29.1 under Current service cost.

29.5 Termination benefits

In 2013, termination benefits and compensation payable in respect of non-compete obligation totalled PLN 3,984 thousand (2012: PLN 4,181 thousand).

In 2013, provisions for termination benefits totalled PLN 74 thousand (2012: PLN 1,502 thousand).

29.6 Sensitivity analysis

The table below presents results of calculations for changed key actuarial assumptions: the salaries and wages growth rate and the discount rate.

Opening balance of the obligation (amount of provision)
PLN ’000

Salaries
and wages
growth rate
Discount
rate
Length-of
-service
awards
Old-age and disability
retirement severance
payments
Death
benefits
Social
benefits
fund
Total (1)
base base 119,459 29,915 8,742 5,768 163,884
base + 1% base 129,304 33,309 9,580 6,749 178,942
base - 1% base 110,898 27,056 8,013 4,986 150,953
base base + 0.5% 114,552 28,328 8,337 5,348 156,565
base base - 0.5% 124,753 31,661 9,182 6,243 171,839

The table below presents results of calculations for changed key actuarial assumptions: the salaries and wages growth rate, medical care contributions, and the discount rate.

Current service cost projected for 2014

PLN ’000

Salaries
and wages
growth rate

Discount
rate
Length-of
-service
awards
Old-age and disability
retirement severance
payments
Death
benefits
Social
benefits
fund
Total (1)
base base 9,138 1,606 668 202 11,614
base + 1% v 10,178 1,888 757 263 13,086
base - 1% base 8,253 1,380 593 157 10,383
base base + 0.5% 8,676 1,488 630 178 10,972
base base - 0.5% 9,642 1,739 710 229 12,320
Cost of discount projected for 2014
PLN ’000

Salaries
and wages
growth rate
Discount
rate
Length-of
-service
awards
Old-age and disability
retirement severance
payments
Death
benefits
Social
benefits
fund
Total (1)
base base 4,651 1,126 348 238 6,363
base + 1% base 5,074 1,271 383 280 7,008
base - 1% base 4,284 1,003 316 205 5,808
base base + 0.5% 4,957 1,181 369 246 6,753
base base - 0.5% 4,311 1,061 324 228 5,924
Total current service cost and cost of discount projected for 2014
PLN ’000

Salaries
and wages
growth rate
Discount
rate
Length-of
-service
awards
Old-age and disability
retirement severance
payments
Death
benefits
Social
benefits
fund
Total (1)
base base 13,789 2,732 1,016 440 17,977
base + 1% base 15,252 3,159 1,140 543 20,094
base - 1% base 12,537 2,383 909 362 16,191
base base + 0.5% 13,633 2,669 999 424 17,725
base base - 0.5% 13,953 2,800 1,034 457 18,244

(1) Given the different nature of pension plans operated by the Group's foreign companies – LOTOS Exploration and Production Norge AS and the companies of the AB LOTOS Geonafta Group – and their negligible effect on the Group's obligations under length-of-service awards and post-employment benefits, such companies' obligations are not included in analysis presented above.