37. Employee benefits - €2,964 million

The Group provides its employees with a variety of benefits, including deferred compensation benefits, additional months’ pay for having reached age limits or eligibility for old-age pension, loyalty bonuses for achievement of seniority milestones, supplemental retirement and healthcare plans, residential electricity discounts and similar benefits. More specifically:

  • for Italy, the item “pension benefits” regards estimated accruals made to cover benefits due under the supplemental retirement schemes of retired executives and the benefits due to personnel under law or contract at the time the employment relationship is terminated. For the foreign companies, the item refers to post-employment benefits, of which the most material regard the pension benefit schemes of Endesa in Spain, which break down into three types that differ on the basis of employee seniority and company. In general, under the framework agreement of October 25, 2000, employees participate in a specific defined contribution pension plan and, in cases of disability or death of employees in service, a defined benefit plan which is covered by appropriate insurance policies. In addition, the group has two other limited-enrollment plans (i) for current and retired Endesa employees covered by the electricity industry collective bargaining agreement prior to the changes introduced with the framework agreement noted earlier and (ii) for employees of the Catalan companies merged in the past (Fecsa/Enher/HidroEmpordà). Both are defined benefit plans and benefits are fully ensured, with the exception of the former plan for benefits in the event of the death of a retired employee. Finally, the Brazilian companies have also established defined benefit plans;
  • the item “electricity discount” comprises benefits regarding electricity supply associated with foreign companies. For Italy, that benefit, which was granted until the end of 2015 to retired employees only, was unilaterally cancelled;
  • the item “health insurance” refers to benefits for current or retired employees covering medical expenses;
  • “other benefits” mainly regard the loyalty bonus, which is adopted in various countries and for Italy is represented by the estimated liability for the benefit entitling employees covered by the electricity workers national collective bargaining agreement to a bonus for achievement of seniority milestones (25th and 35th year of service). It also includes other incentive plans, which provide for the award to certain Company managers of a monetary bonus subject to specified conditions.

The following table reports changes in the defined benefit obligation for post-employment and other long-term employee benefits at December 31, 2020, and December 31, 2019, respectively, as well as a reconciliation of that obligation with the actuarial liability.

Millions of euro 2020 2019
  Pension benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits Total
CHANGES IN ACTUARIAL OBLIGATION                    
Actuarial obligation at the start of the year 5,691 904 263 242 7,100 5,072 767 253 231 6,323
Current service cost 18 3 4 38 63 20 4 4 32 60
Interest expense 249 5 7 4 265 335 15 10 5 365
Actuarial (gains)/losses arising from changes in demographic assumptions 45 12 6 1 64 (16) - 1 - (15)
Actuarial (gains)/losses arising from changes in financial assumptions 105 19 (2) 2 124 701 91 15 8 815
Experience adjustments 466 (21) (7) (8) 430 94 55 (4) 13 158
Past service cost (24) (504) (13) (1) (542) (8) - - 2 (6)
(Gains)/Losses arising from settlements (584) - - - (584) - - - - -
Exchange differences (1,206) (1) (30) (7) (1,244) (84) - (2) 1 (85)
Employer contributions - - - - - - - - - -
Employee contributions 1 - - - 1 2 - - - 2
Benefits paid (358) (16) (11) (48) (433) (431) (31) (14) (45) (521)
Other changes 5 2 - (1) 6 6 3 - (5) 4
Liabilities included in disposal groups classified as held for sale - - - - - - - - - -
Actuarial obligation at year-end (A) 4,408 403 217 222 5,250 5,691 904 263 242 7,100
CHANGES IN PLAN ASSETS                    
Fair value of plan assets at the start of the year 3,374 - - - 3,374 3,160 - - - 3,160
Interest income 160 - - - 160 235 - - - 235
Expected return on plan assets excluding amounts included in interest income 85 - - - 85 272 - - - 272
Exchange differences (782) - - - (782) (50) - - - (50)
Employer contributions 342 16 11 21 390 186 31 14 16 247
Employee contributions 1 - - - 1 2 - - - 2
Benefits paid (358) (16) (11) (21) (406) (431) (31) (14) (16) (492)
Other payments (523) - - - (523) - - - - -
Changes in the consolidation scope - - - - - - - - - -
Fair value of plan assets at year-end (B) 2,299 - - - 2,299 3,374 - - - 3,374
EFFECT OF ASSET CEILING                    
Asset ceiling at the start of the year 45 - - - 45 24 - - - 24
Interest income 3 - - - 3 2 - - - 2
Changes in asset ceiling (24) - - - (24) 20 - - - 20
Exchange differences (11) - - - (11) (1) - - - (1)
Changes in the consolidation scope - - - - - - - - - -
Asset ceiling at year-end (C) 13 - - - 13 45 - - - 45
Net liability in statement of financial position (A-B+C) 2,122 403 217 222 2,964 2,362 904 263 242 3,771


The decrease in the actuarial liability compared with 2019, equal to €807 million, is mainly attributable to the transfer by Enel Distribuição São Paulo in Brazil of part of its employee defined benefit plans to external companies. These plans thereby became defined contribution plans, which are not subject to actuarial measurement.

Note also that the obligations in respect of Enel Group personnel have not been appreciably affected by the effects of the COVID-19 emergency, which are considered temporary and short-term.

Millions of euro    
  2020 2019
(Gains)/Losses taken to profit or loss    
Service cost and past service cost (509) 32
Net interest expense 108 129
(Gains)/Losses arising from settlements (61) -
Actuarial (gains)/losses on other long-term benefits 31 25
Other changes (9) -
Total (440) 186
 
Millions of euro    
  2020 2019
Change in (gains)/losses in OCI    

Expected return on plan assets excluding amounts included in interest income

(85) (272)
Actuarial (gains)/losses on defined benefit plans 626 958
Changes in asset ceiling excluding amounts included in interest income (24) 20
Other changes (1) (4)
Total 516 702


The decrease in the cost recognized in profit or loss was equal to €626 million. The impact on the income statement is, therefore, smaller than in 2019, due mainly to the signing in 2020 of the 5th Endesa Collective Bargaining Agreement, which modified the electricity discount benefit for current and former employees, with the consequent reversal of the associated provision.

The liability recognized in the statement of financial position at the end of the year is reported net of the fair value of plan assets, amounting to €2,299 million at December 31, 2020. Those assets, which are entirely in Spain and Brazil, break down as follows.

  at Dec. 31, 2020 at Dec. 31, 2019
Investments quoted in active markets    
Equity instruments 7% 8%
Fixed-income securities 63% 68%
Investment property 2% 3%
Other - -
Unquoted investments    
Assets held by insurance undertakings - -
Other 28% 21%
Total 100% 100%


The main actuarial assumptions used to calculate the liabilities in respect of employee benefits and the plan assets, which are consistent with those used the previous year, are set out in the following table.

  Italy Iberia Latin America Other countries Italy Iberia Latin America Other countries
  2020 2019
Discount rate 0.00%
-0.50%
0.00%
-0.61%
2.55%
-7.95%

0.75%

-6.30%

0.00%
-0.70%
0.00%
-1.14%
3.40%
-7.59%
1.20%
-6.45%
Inflation rate 0.50% 1.00% 3.00%
-4.85%
0.75%
-3.83%
0.70% 2.00% 3.00%
-8.00%
1.00%
-3.94%
Rate of wage increases 0.50%
-2.50%
1.00% 3.80%
-5.04%
2.25%
-3.83%
0.70%
-1.70%
2.00% 3.80%
-8.00%
2.50%
-3.94%
Rate of increase in healthcare costs 1.50% 3.20% 7.12%
-8.00%
- 1.70% 3.20% 7.12%
-8.00%
-
Expected rate of return on plan assets - 0.57%

6.08%

-7.33%

- - 1.09% 6.44%
-7.38%
-


The following table reports the outcome of a sensitivity analysis that demonstrates the effects on the defined benefit obligation of changes reasonably possible at the end of the year in the actuarial assumptions used in estimating the obligation.

  Pension benefits Electricity discount Health insurance Other benefits Pension benefits Electricity discount Health insurance Other benefits
  at Dec. 31, 2020 at Dec. 31, 2019
Decrease of 0.5% in discount rate 239 30 11 (1) 321 78 15 5
Increase of 0.5% in discount rate (190) (30) (15) (11) (285) (73) (19) (7)
Increase of 0.5% in inflation rate (1) (5) (3) (7) (2) (74) (5) (3)
Decrease of 0.5% in inflation rate 33 2 7 (4) 31 79 10 1
Increase of 0.5% in remuneration 14 (2) (3) (3) 19 2 (2) 5
Increase of 0.5% in pensions currently being paid 15 (2) (3) (6) 9 (2) (3) (1)
Increase of 1% healthcare costs - - (2) - - - 12 -
Increase of 1 year in life expectancy of active and retired employees 27 (11) 2 (34) 179 36 19 (1)


The sensitivity analysis used an approach that extrapolates the effect on the defined benefit obligation of reasonable changes in an individual actuarial assumption, leaving the other assumptions unchanged.

The contributions expected to be paid into defined benefit plans in the subsequent year amount to €80 million.

The following table reports expected benefit payments in the coming years for defined benefit plans.

Millions of euro    
  at Dec. 31, 2020 at Dec. 31, 2019
Within 1 year 366 461
In 1-2 years 337 447
In 2-5 years 971 1,288
More than 5 years 1,534 2,040