32 Employee benefits

Personnel expenses

Million CHF

2014

2013

Production and distribution

2,377

2,493

Marketing and sales

368

377

Administration

793

782

Total

3,538

3,653

Personnel expenses and number of personnel

The Group’s total personnel expenses, including social charges, are recognized in the relevant expenditure line by function in the consolidated statement of income and amounted to CHF 3,538 million (2013: 3,653). As of December 31, 2014, the Group employed 67,584 people (2013: 70,857).

Defined benefit pension plans

The Group’s main defined benefit pension plans are in Switzerland, the United Kingdom and in North America and are funded through legally separate trustee administered funds. The cash funding of these plans, which may from time to time involve special payments, is designed to ensure that present and future contributions should be sufficient to meet future liabilities.

Switzerland

The Swiss pension plans of Swiss companies contain a cash balance benefit formula, accounted for as a defined benefit plan. Employer and employee contributions are defined in the pension fund rules in terms of an age related sliding scale of percentages of salary. Under Swiss law, the pension fund guarantees the vested benefit amount as confirmed annually to members. Interest may be added to member balances at the discretion of the Board of Trustees. At retirement date, members have the right to take their retirement benefit as a lump sum, an annuity or part as a lump sum with the balance converted to a fixed annuity at the rates defined in the fund rules. The Board of Trustees may increase the annuity at their discretion subject to the plan’s funded status including sufficient free funds as determined according to Swiss statutory valuation rules. The Swiss pension plans fulfill the requirements of the regulatory framework which requires a minimum level of benefits.

The trustees invest in a diversified range of assets. The investment strategy takes into account the pension fund’s tolerance to risk as well as the funding needs (minimum investment return necessary to stabilize the coverage ratio in the long run).

No material plan amendment, curtailment or settlement has occurred during the year.

United Kingdom (UK)

The companies operate several defined benefit pension plans in the UK, under which pensions payable to employees depend on final salary and length of service. Active members of these plans pay a contribution as a percentage of pensionable salary, and the companies meet the balance of the cost of providing the benefits. All of these plans are closed to new entrants, and the companies operate defined contribution plans which employees who are not members of a defined benefit plan are eligible to join.

The companies’ UK defined benefit pension plans are registered schemes under UK tax law, and in each case the assets are held in a trust and managed by trustees separate from the company. In accordance with UK legislation, the trustees of each plan undertake an actuarial valuation at least once every three years. After each valuation, the company and the trustees agree on the contributions required to be made to the relevant plan. These contributions are determined based on certain assumptions including the returns which will be achieved on the plans’ investments and the longevity of plan members. To the extent that the assumptions are not borne out in practice, there is a risk that future contributions from the companies will be higher than anticipated. The trustees invest in a diversified range of assets including insurance policies, thereby reducing the potential risks.

The companies and trustees agree a contribution schedule for the defined benefit pension plans in accordance with an actuarial valuation for funding purposes. This contribution schedule is revised following these actuarial valuations.

No material plan amendment or curtailment has occurred during the year. In 2013, a defined benefit plan was transferred to an insurance company. The plan liabilities transferred, which equaled the plan assets, amounted to CHF 115 million and no settlement gain or loss was recognized. As a result of this transaction, all future benefits will be paid out by the insurance company to the respective employees concerned.

North America (United States and Canada)

The companies operate defined contribution plans for existing and new employees and a number of defined benefit pension plans. Some defined benefit pension plans have been closed to new entrants and were frozen to future accruals. Active employees participate in defined contribution or defined benefit plans. The defined benefit pension plans have been based or are based on the average final salary.

The companies must contribute a minimum amount to the defined benefit pension plans annually which is determined actuarially and is comprised of service costs as well as payment toward any existing deficits. For plans that are currently closed, there will generally be no service component in the future. Employer contributions toward the defined contribution plan are made either monthly or quarterly and are based on a percentage of covered payroll.

The pension committees of the various companies are responsible for operating the defined benefit plans in compliance with existing regulations and for the management of plan assets.

The plans hold a large percentage of plan assets in equity investments. To the extent that equity performance is volatile in the future, the required employer contributions would also experience similar volatility in the future. The companies assume and are responsible for the management of all risks associated with the defined benefit pension plans, including investment risks, interest rate risks and longevity risks. These risks are not considered significant to the various companies as a whole.

The plan assets are invested in a diversified range of assets. The assets in the United States include a certain proportion which hedge the liability swings against interest rate movements, with those assets primarily invested in fixed income investments, particularly intermediate and longer term instruments.

The companies in the United States intend to pay the minimum required contributions as prescribed under Internal Revenue Service (IRS) regulations in addition to voluntary amounts in order to achieve and maintain an IRS funded status of at least 80%. However, for the Canadian plans, the companies intend to pay at least the minimum amount prescribed by the Ontario Pension Benefits Act.

No material plan amendment, curtailment or settlement has occurred during the year.

Other post-employment benefit plans

The Group operates a number of other post-employment benefit plans. A number of these plans are not externally funded, but are covered by provisions in the statement of financial position of the respective companies.

Status of the Group’s defined benefit plans

The status of the Group’s defined benefit plans using actuarial assumptions determined in accordance with IAS 19 Employee Benefits is summarized below. The tables provide reconciliations of defined benefit obligations, plan assets and the funded status for the defined benefit pension plans to the amounts recognized in the statement of financial position.

Reconciliation of retirement benefit plans to the statement of financial position

Million CHF

2014

2013

Net liability arising from defined benefit pension plans

774

587

Net liability arising from other post-employment benefit plans

81

64

Net liability

854

651

 

 

 

Reflected in the statement of financial position as follows:

 

 

Other long-term assets

(8)

(4)

Defined benefit obligations

863

655

Net liability

854

651

Retirement benefit plans

 

Defined benefit pension plans

Other post-employment benefit plans

Million CHF

2014

2013

2014

2013

Present value of funded obligations

3,454

2,976

0

0

Fair value of plan assets

(2,942)

(2,628)

0

0

Plan deficit of funded obligations

512

348

0

0

Present value of unfunded obligations

262

239

81

64

Net liability from funded and unfunded plans

774

587

81

64

Of which:

 

 

 

 

Switzerland

201

117

0

0

United Kingdom

162

109

0

0

North America (United States and Canada)

72

55

59

51

Rest of world

339

305

22

13

 

 

 

 

 

Costs recognized in the statement of income are as follows:

 

 

 

 

Current service costs

84

91

2

2

Past service costs (including curtailments)

0

(14)

3

(3)

(Gains) losses on settlements

(1)

4

2

0

Net interest expense

23

28

3

3

Others

1

1

0

0

Total (included in personnel expenses)

107

110

10

2

Of which:

 

 

 

 

Switzerland

41

43

0

0

United Kingdom

16

16

0

0

North America (United States and Canada)

17

23

3

4

Rest of world

33

28

7

(1)

 

 

 

 

 

Amounts recognized in other comprehensive earnings:

 

 

 

 

Actuarial gains (losses) arising from changes in demographic assumptions

26

(21)

(3)

6

Actuarial gains (losses) arising from changes in financial assumptions

(418)

99

(5)

5

Actuarial gains (losses) arising from experience adjustments

32

(35)

3

7

Return on plan assets excluding interest income

165

155

0

0

Total recorded in other comprehensive earnings

(195)

198

(5)

18

Of which:

 

 

 

 

Switzerland

(80)

98

0

0

United Kingdom

(44)

30

0

0

North America (United States and Canada)

(30)

71

(3)

16

Rest of world

(41)

0

(2)

2

 

 

 

 

 

Present value of funded and unfunded obligations

 

 

 

 

Opening balance as per January 1

3,214

3,445

64

83

Current service costs

84

91

2

2

Interest expense

117

108

3

3

Contribution by the employees

20

21

0

0

Actuarial (gains) losses

360

(43)

5

(18)

Benefits paid

(165)

(204)

(5)

(3)

Past service costs (including curtailments)

0

(14)

3

(3)

Change in structure

0

(13)

0

3

Settlements

(5)

(112)

2

0

Currency translation effects

89

(65)

6

(2)

Closing balance as per December 31

3,715

3,214

81

64

Of which:

 

 

 

 

Switzerland

1,627

1,420

0

0

United Kingdom

957

821

0

0

North America (United States and Canada)

609

511

59

51

Rest of world

522

463

22

13

 

 

 

 

 

Fair value of plan assets

 

 

 

 

Opening balance as per January 1

2,628

2,631

0

0

Interest income

94

80

0

0

Return on plan assets excluding interest income

165

155

0

0

Contribution by the employer

106

109

4

3

Contribution by the employees

20

21

0

0

Benefits paid

(142)

(190)

(4)

(3)

Change in structure

0

(13)

0

0

Settlements

(3)

(116)

0

0

Currency translation effects

74

(49)

0

0

Closing balance as per December 31

2,942

2,628

0

0

Of which:

 

 

 

 

Switzerland

1,427

1,302

0

0

United Kingdom

795

712

0

0

North America (United States and Canada)

537

456

0

0

Rest of world

183

158

0

0

 

 

 

 

 

Plan assets based on quoted market prices:

 

 

 

 

Cash and cash equivalents

113

92

 

 

Equity instruments of Holcim Ltd or subsidiaries

2

2

 

 

Equity instruments of third parties

979

934

 

 

Debt instruments of Holcim Ltd or subsidiaries

5

8

 

 

Debt instruments of third parties

716

637

 

 

Land and buildings occupied or used by third parties

373

358

 

 

Derivatives

26

15

 

 

Investment funds

102

88

 

 

Asset-backed securities

2

9

 

 

Structured debt

42

28

 

 

Plan assets based on non-quoted prices:

 

 

 

 

Equity instruments of third parties

47

25

 

 

Debt instruments of Holcim Ltd or subsidiaries

4

5

 

 

Debt instruments of third parties

59

25

 

 

Land and buildings occupied or used by Holcim Ltd or subsidiaries

0

1

 

 

Land and buildings occupied or used by third parties

26

25

 

 

Derivatives

7

6

 

 

Investment funds

54

35

 

 

Structured debt

3

3

 

 

Others

382

332

 

 

Total plan assets at fair value

2,942

2,628

 

 

 

 

 

 

 

Effect of asset ceiling

 

 

 

 

Opening balance as per January 1

0

1

 

 

Interest expense or (income)

0

0

 

 

Change in effect of asset ceiling excluding interest (income) expense

0

(1)

 

 

Closing balance as per December 31

0

0

 

 

Principal actuarial assumptions (weighted average) used at the end of the reporting period for defined benefit pension plans

 

Total Group

Switzerland

United Kingdom

North America

 

2014

2013

2014

2013

2014

2013

2014

2013

Discount rate in %

2.7%

3.6%

1.2%

2.4%

3.5%

4.6%

4.0%

4.6%

Expected salary increases in %

2.5%

2.7%

1.2%

1.7%

2.9%

3.2%

3.6%

3.5%

Life expectancy in years after the age of 65

21.4

21.8

21.9

22.5

22.0

22.0

20.4

20.5

Weighted average duration of defined benefit pension plans

Duration of the defined benefit obligation

Total Group

Switzerland

United Kingdom

North America

 

2014

2013

2014

2013

2014

2013

2014

2013

Weighted average duration in years

13.8

12.9

13.5

11.5

17.0

17.0

11.8

11.8

Sensitivity analysis as per December 31, 2014 on defined benefit pension plans

Impact on the defined benefit obligation

Total Group

Switzerland

United Kingdom

North America

Mio. CHF

Increase

Decrease

Increase

Decrease

Increase

Decrease

Increase

Decrease

Discount rate (1% point change)

(444)

552

(196)

242

(135)

174

(62)

77

Expected salary increases (1% point change)

104

(90)

22

(20)

26

(23)

16

(12)

Life expectancy in years after the age of 65 (1 year change)

109

(116)

48

(58)

35

(33)

12

(12)

Sensitivity analysis as per December 31, 2013 on defined benefit pension plans

Impact on the defined benefit obligation

Total Group

Switzerland

United Kingdom

North America

Mio. CHF

Increase

Decrease

Increase

Decrease

Increase

Decrease

Increase

Decrease

Discount rate (1% point change)

(363)

446

(148)

177

(119)

154

(55)

65

Expected salary increases (1% point change)

92

(74)

21

(17)

22

(19)

15

(12)

Life expectancy in years after the age of 65 (1 year change)

87

(97)

36

(45)

27

(27)

11

(11)

Expected contributions by the employer to be paid to the post-employment benefit plans during the annual period beginning after the end of the reporting period are CHF 106 million (2013: 105), of which CHF 34 million (2013: 33) related to Switzerland, CHF 14 million (2013: 14) related to the United Kingdom and CHF 36 million (2013: 37) related to North America.