The Group provides a number of different long-term employment benefits to its employees – special miners’ benefits, severance payments, vouchers, loyalty benefits and other. The Group’s net obligation in respect of long-term service benefits is the amount of benefits that are payable after the balance sheet date and that the employees have earned in return for their service in the current and prior periods.
The Group’s employee benefit scheme covers the legal requirements valid for the mining industry and other benefits concluded with the labour union in the general labour agreement. All benefits are unfunded. The significant benefits are listed below.
EUR‘000 2012 2011
Special miners benefits 60,687 54,669
Severance payment 19,549 21,951
Vouchers 9,380 8,864
Loyalty benefits 1,574 1,240
Other long-term benefits 2,021 1,188
93,211 87,912
Increase in employee benefits as of 31 December 2012 compared to 31 December 2011 is a cumulative result of updated assumptions that are disclosed at the end of this Note.
Special miner’s benefits
Length-of-service benefit for miners is paid to all employees in mining profession once a year and is based on the length of employment relationship. The benefit is required by current legislation of the Czech Republic. Special miner benefits are assigned to employees working underground once they achieve 100% of the highest allowable exposure to mine dust, in case of both position transfer or employment termination.
Those bonuses are paid monthly, until the pension entitlement arises or the age of 60 is reached. The benefit is required by current legislation of the Czech Republic.
NEW WORLD RESOURCES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012
131 24. EMPLOYEE BENEFITS (CONTINUED)
Health-related severance payment is based on the collective agreement of OKD and its labour union. Entitled persons are employees whose employment relationship was dissolved owing to their inability for health reasons to continue performing their work and who are not entitled to receive other severance payment. This benefit is a one-time payment calculated as a multiple of average monthly wage in connection with years of service.
Retirement benefits are based also on a collective agreement of OKD and its labour union and are paid to employees who terminate their employment contract upon becoming entitled to draw an old age pension. The one-time payment is a multiple of average monthly wage.
Severance payments
Severance payments are based on legislative requirement in the Czech Republic. Entitled persons are employees whose employment relationship was dissolved owing to having achieved 100% of the highest allowable exposure to mine dust or occupational injury or incidence of occupational illness and inability to find another suitable position for them within the entity. The payment is made as a one-time disbursement.
Vouchers
This benefit has been recognized at OKD since 1 January 2009 based on an amendment to the collective agreement between OKD and its labour union at that time. All employees are granted vouchers annually and the amount is based on the length of employment relationship. Employees may use these vouchers for health, cultural, sporting, educational and holiday purposes.
Loyalty benefits
Stabilization premiums are defined in the collective agreements of individual Group entities and belong to all current employees who are not entitled to length-of-service benefits for miners. This bonus is paid once a year and the amount is calculated based on the length of the uninterrupted service.
Length-of-service bonuses are defined in the collective labour agreements of individual Group entities and paid based on the specific provisions of collective agreements, tied to years of uninterrupted service. This benefit is designed as a one-time payment.
Changes in the present value of the defined benefit obligation:
EUR‘000 2012 2011
Defined benefit obligation at 1 January 87,912 95,892
Benefits paid (11,172) (10,766)
Net benefit expense 14,246 5,229
Currency translation 2,225 (2,443)
Defined benefit obligation at 31 December 93,211 87,912
The following table summarizes the components of net benefit expense recognised in the income statement and the funding status and amounts recognised in the statement of financial position for the respective plan:
EUR‘000 2012 2011
Current service cost 5,572 5,083
Interest cost on benefit obligation 1,378 2,948
Actuarial loss/(gain) 7,296 (2,802)
Net benefit expense 14,246 5,229
The principal financial and demographic assumptions used in determining long-term employee benefits are shown below:
NEW WORLD RESOURCES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012
132 24. EMPLOYEE BENEFITS (CONTINUED)
Discount rate - Discount rate is derived from the yield of the Czech government bonds as of the balance
sheet date. The average period of payment is considered for the choice of the most suitable bond. The discount rate used for the calculation of employee benefits as of 31 December 2012 was 1.58 % p.a. (as of 31 December 2011: 3.58% p.a.).
Wage increase - This assumption is relevant where the benefit depends on the future wage. In all cases
the Group estimates an average wage increase of 4.6% per annum as of 31 December 2012 (6% per annum as of 31 December 2011).
Mortality - Model mortality for the benefit calculation is undertaken from statistical tables, specific to the
relevant region in which OKD mines, as published by the Czech Statistical Office.
Retirement age – that variable has changed in 2012 compared to 2011 due to change of applicable
Czech legislation.
The retirement age for men is set as follows:
• 55 years if the person permanently worked underground for 15 years as of 31 December 1992 • 55 years and 6 months if the person permanently worked underground for minimum 11 years
and maximum 14 years as of 31 December 1992 and in total worked 25 years
• Retirement age for men under Czech legislation less 5 years if an employee started working as a miner before 1 January 1993 and worked 3,300 shifts in underground by 31 December 2008 • 62-70 years (2011: 66 years) for all other employees not fulfilling above criteria
The retirement age for women is set to 58-70 years (2011: 63 years).