10.12.1 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.
| Post-employment benefits | Length-of-service awards and other benefits | Total | |||||
|---|---|---|---|---|---|---|---|
| Note | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |
| Jan 1 | 67.6 | 58.7 | 181.9 | 169.8 | 249.5 | 228.5 | |
| Current service cost | 4.9 | 4.0 | 14.4 | 14.0 | 19.3 | 18.0 | |
| Cost of discount | 9.7 | 0.9 | 1.1 | 2.5 | 3.3 | 3.4 | 4.4 |
| Settlement of the scheme | – | (0.1) | – | (0.4) | – | (0.5) | |
| Benefits paid | (4.2) | (3.8) | (15.1) | (14.2) | (19.3) | (18.0) | |
| Actuarial (gains)/losses under profit or loss | – | – | 12.5 | 9.4 | 12.5 | 9.4 | |
| Actuarial (gains)/losses under other comprehensive income | (6.6) | 7.7 | – | – | (6.6) | 7.7 | |
| Dec 31 | 62.6 | 67.6 | 196.2 | 181.9 | 258.8 | 249.5 | |
| including: | |||||||
| long-term portion | 57.3 | 62.0 | 178.9 | 167.5 | 236.2 | 229.5 | |
| short-term portion | 5.3 | 5.6 | 17.3 | 14.4 | 22.6 | 20.0 | |
| Obligations under length-of-service awards and post-employment benefits at foreign companies (1) | 0.8 | 1.1 | – | – | 0.8 | 1.1 | |
| Dec 31 | 63.4 | 68.7 | 196.2 | 181.9 | 259.6 | 250.6 | |
| including: | |||||||
| long-term portion | 58.0 | 62.7 | 178.9 | 167.5 | 236.9 | 230.2 | |
| short-term portion | 5.4 | 6.0 | 17.3 | 14.4 | 22.7 | 20.4 | |
(1) Given the different nature of retirement plans at the AB LOTOS Geonafta Group companies, and their immaterial effect on the Group's obligations under length- of-service awards and post-employment benefits, those companies' obligations are presented separately in the line item Obligations under length-of-service awards and post-employment benefits at foreign companies.
Total cost of future employee benefit payments charged to profit or loss
| Note | 2021 | 2020 | |
|---|---|---|---|
| Items recognised in profit or loss: | 34.9 | 31.6 | |
| Length-of-service awards, retirement and other post-employment benefits: | 9.3 | 31.5 | 27.2 |
| current service cost | 19.3 | 18.0 | |
| effect of foreign operations | (0.3) | (0.2) | |
| actuarial (gains)/losses | 12.5 | 9.4 | |
| Cost of discount | 9.7 | 3.4 | 4.4 |
| Items recognised in other comprehensive income: | (6.6) | 7.8 | |
| Actuarial (gains)/losses | (6.6) | 7.7 | |
| Effect of foreign operations | – | 0.1 | |
| Total comprehensive income | 28.3 | 39.4 |
Actuarial assumptions
| Key assumptions adopted by the actuary | 31 grudnia 2021 | 31 grudnia 2020 |
|---|---|---|
| Discount rate (%) | 3.50% | 1.40% |
| Expected inflation rate (%) | 2.50% | 2.60% |
| Employee turnover ratio (%) | 3.19% | 4.40% |
| Expected wage growth rate (%) in the following year | 10.00% | 3.30% |
| Expected wage growth rate (%) in subsequent years | 3.50% | 2.50% |
- In 2021, the employee attrition probability was based on the historical data on employee turnover at the Company and sector statistical data. The employee turnover ratios applied by the actuary were determined separately for age categories in five-year intervals. In 2020, the employee attrition probability was based on the historical data on employee turnover at the Company and statistical data on the Polish labour market. The employee turnover ratios applied by the actuary were determined separately for age categories in ten-year intervals. The employee turnover ratio is now calculated on an average basis.
- The mortality and life expectancy ratios are based on the Life Expectancy Tables of Poland for 2019-2020, published by Statistics Poland (GUS), and assume that the Company’s employee population is representative of the average Polish population in terms of mortality (December 31st 2020: Life Expectancy Tables of Poland for 2019).
- 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.
- The discount rate on future benefits was assumed at 3.5%, i.e. reflecting the assumption made at the corporate level (December 31st 2020: 1.4%, i.e. reflecting the assumption made at the corporate level).
Sensitivity analysis
The table below presents results of calculations for changed key actuarial assumptions: the salaries and wages growth rate and the discount rate.
Initial obligation balance
| Wage growth rate | Discount rate | Length-of-service awards | Old-age and disability retirement severance payments | Death benefits | Social benefit fund | Total(1) |
|---|---|---|---|---|---|---|
| base | base | 178.9 | 53.0 | 10.2 | 16.7 | 258.8 |
| base + 1% | base | 193.8 | 59.0 | 11.1 | 20.2 | 284.1 |
| base – 1% | base | 163.1 | 47.8 | 9.3 | 14.1 | 234.3 |
| base | base + 0.5% | 171.3 | 50.0 | 9.7 | 15.3 | 246.3 |
| base | base – 0.5% | 187.1 | 56.2 | 10.6 | 18.3 | 272.2 |
(1)Given the different nature of retirement plans at the AB LOTOS Geonafta Group companies, and their immaterial effect on the Group's obligations under length- of-service awards and post-employment benefits, those companies' obligations are not included in the analysis.
The tables below present results of calculations for changed key actuarial assumptions: the salaries and wages growth rate and the discount rate.
Current service cost projected for 2022
| Wage growth rate | Discount rate | Length-of-service awards | Old-age and disability retirement severance payments | Death benefits | Death benefits fund | Total(1) |
|---|---|---|---|---|---|---|
| base | base | 14.6 | 3.5 | 0.9 | 0.9 | 19.9 |
| base + 1% | base | 16.3 | 4.1 | 1.0 | 1.2 | 22.6 |
| base – 1% | base | 13.2 | 3.0 | 0.8 | 0.7 | 17.7 |
| base | base + 0.5% | 13.9 | 3.2 | 0.8 | 0.8 | 18.7 |
| base | base – 0.5% | 15.5 | 3.8 | 0.9 | 1.0 | 21.2 |
(1)Given the different nature of retirement plans at the AB LOTOS Geonafta Group companies, and their immaterial effect on the Group's obligations under length- of-service awards and post-employment benefits, those companies' obligations are not included in the analysis
Cost of discount projected for 2022
| Wage growth rate | Discount rate | Length-of-service awards | Old-age and disability retirement severance payments | Death benefits | Social benefits fund | Total(1) |
|---|---|---|---|---|---|---|
| base | base | 5.6 | 1.7 | 0.3 | 0.6 | 8.2 |
| base + 1% | base | 6.2 | 1.9 | 0.4 | 0.7 | 9.2 |
| base – 1% | base | 5.2 | 1.5 | 0.3 | 0.5 | 7.5 |
| base | base + 0.5% | 6.2 | 1.8 | 0.4 | 0.6 | 9.0 |
| base | base – 0.5% | 5.1 | 1.5 | 0.3 | 0.5 | 7.4 |
(1) Given the different nature of retirement plans at the AB LOTOS Geonafta Group companies, and their immaterial effect on the Group's obligations under length- of-service awards and post-employment benefits, those companies' obligations are not included in the analysis.
Total current service cost and cost of discount projected for 2022
| Wage growth rate | Discount rate | Length-of-service awards | Old-age and disability retirement severance payments | Death benefits | Social benefits fund | Total(1) |
|---|---|---|---|---|---|---|
| base | base | 20.2 | 5.2 | 1.2 | 1.5 | 28.1 |
| base + 1% | base | 22.5 | 6.0 | 1.4 | 1.9 | 31.8 |
| base – 1% | base | 18.4 | 4.5 | 1.1 | 1.2 | 25.2 |
| base | base + 0.5% | 20.1 | 5.0 | 1.2 | 1.4 | 27.7 |
| base | base – 0.5% | 20.6 | 5.3 | 1.2 | 1.5 | 28.6 |
(1) Given the different nature of retirement plans at the AB LOTOS Geonafta Group companies, and their immaterial effect on the Group's obligations under length- of-service awards and post-employment benefits, those companies' obligations are not included in the analysis.