2.2.3.1 14. Share-based payment arrangements

A. Description of the share-based payment arrangements

The Group distinguishes two participation plans. One plan relates to members of the Executive Committee and senior management (applicable as of 2014), the other plan relates to other employees (applicable as of 2015). Both plans have further details set out for employees in The Netherlands ("The Netherlands participation plan") and for employees in the United Kingdom, Germany and Belgium (collectively the “Foreign participation plan”). The number of participants in all current participation plans is 19.1% (2017: 24.2%) of the number of employees of the Group.

The participation plans are annual plans only applicable for the respective year to which they relate, any additional participation plans are considered new plans. New participation plans can only be executed upon approval of the Supervisory Board and on the basis of authorization by the Annual General Meeting of Shareholders for the purchase of shares related to the participation plan.

Participation plans 2018

On 26 April 2018, the Group launched two employee participation plans. One plan relates to members of the Executive Committee and senior management, the other plan relates to other employees. For both plans the participants are required to remain in service for 36 consecutive months to be entitled to the discount on the depositary receipts being purchased. The employees are entitled to buy depositary receipts at a discount of 13.5% (employees) or 20% (Executive Committee and senior management) on the fair value of the depositary receipt at the grant date, for which additional depositary receipts are provided. The conditions of both plans are consistent with the participation plans applicable for 2017.

During 2018, 46 employees (of which 11 foreign employees) participated in the participation plan for the Executive Committee and senior management and 583 employees (of which 143 foreign employees) participated in the participation plan for other employees.

The number of depositary receipts granted with respect to the 2018 participations plans were as follows:

In 2018 no granted depositary receipts were cancelled as a result of leavers.

Participation plans 2017 and 2016

In 2017 and 2016 the Group offered two 2017 participation plans to the employees. One plan relates to members of the Executive Committee and senior management, the other plan relates to other employees. For both plans the participants are required to remain in service for 36 consecutive months to be entitled to the discount on the depositary receipts being purchased. The employee is entitled to buy depositary receipts at a discount of 13.5% (employees) or 20% (Executive Committee and senior management) on the fair value of the depositary receipt at the grant date, for which additional depositary receipts are provided. The conditions of both plans are consistent with the participation plans applicable for 2015, except for the participation plan of 2017 where the lock-up period of the depositary receipts for the Executive Committee and senior management have been extended to 5 years compared to 3 years for the 2015 and 2016 plans.

During 2017, 35 employees (of which 7 foreign employees) participated in the participation plan for the Executive Committee and senior management and 297 employees (of which 59 foreign employees) participated in the participation plan for other employees.

The number of depositary receipts granted with respect to the 2017 participations plans were as follows:

In 2018 no (2017: 133) granted depositary receipts were cancelled as a result of leavers.

During 2016, 34 employees (of which 8 foreign employees) participated in the participation plan for the Executive Committee and senior management and 319 employees (of which 61 foreign employees) participated in the participation plan for other employees. The number of depositary receipts granted with respect to the 2016 participations plans were as follows:

In 2018 a total of 2,584 (2017: 750) granted depositary receipts were cancelled as a result of leavers.

Differences between the Netherlands and Foreign plans

Key differences between the Netherlands and Foreign participation plans for the additional depositary receipts are:

• The Netherlands: A service related vesting condition applies, in that the original value of the discount is repaid by the employee to the Group if the employee leaves within 3 years after allocation. All allocated depositary receipts were granted in 2018, 2017, 2016 and 2015 respectively .
• Foreign participation plan: A service related vesting condition applies, in that the employee will not be entitled to receive the additional depositary receipts if employee leaves within 3 years after allocation. Additional depositary receipts for foreign employees are held in custody by the Company during the term and are issued to the foreign employees at settlement date. The total cost to the Company for the additional depositary receipts, including the cash-settled employee tax obligations, is limited to the total value of the discount provided to Dutch participants.

Participation plans 2015 and 2014

The participation plans 2015 and 2014 are completed.

B. Measurement of fair values

Participation plans 2018

The value of the depositary receipts of the Company, for which the employee (members of the Executive Committee, senior management and other employees) could buy their depositary receipts, was determined as the average closing price in the 5 trading days during the period 2 May - 8 May 2018 and amounted to €11.72 per share.

Participation plans 2017

The value of the depositary receipt of the Company, for which the employee (members of the Executive Committee, senior management and other employees) could buy their depositary receipts, was determined as the average of the closing prices in the 5 trading days during the period 2 - 8 May 2017, which amounted to €8.66 per share.

Participation plans 2016

The value of the depositary receipt of the Company, for which the employee (members of the Executive Committee, senior management and other employees) could buy their depositary receipts, was determined as the average of the closing prices on the Euronext in the 5 trading days during the period 19 - 25 April 2016, which amounted to €6.24 per share.

For all participation plans, the fiscal obligations for a foreign employee are based on the fair value of the depositary receipt at the date of settlement.   

C. Amounts recognised in statement of profit or loss and statement of financial position

The expenses are recognised in the statement of profit or loss over the term of the participation plan (3 years), see Note 15F. The depositary receipts for the employees in the Netherlands participation plan were fully granted in the respective years. The non-vested portion was not recognized within profit and loss, but rather as other receivables within trade and other receivables of €472 thousand (2017: €565 thousand) of which €307 thousand was classified as current (2017: €382 thousand). The cumulative share-based payment reserve relating to the Foreign participation plan amounts to €111 thousand (2017: €233 thousand).

2.2.3.2 15. Employee benefits

Separate employee benefit plans are applicable in the various countries where the Group operates.

For details on the employee benefit expenses, see Note 15F.

A. Post-employment plans and funding

The Group contributes to the following post-employment plans which are described per cluster.

The Netherlands

In the Netherlands the employees of different subsidiaries were covered by two post-employment plans upto and until 2015. An insured defined benefit plan was in place for (former) employees of Hendrix, which company was acquired by the Group in 2012. Furthermore, an insured defined contribution plan was in place for (former) ForFarmers employees. Effective per 1 January 2016, the Group entered into a new post-employment plan that is applicable for all Dutch employees, leaving all post-employment rights accrued until 31 December 2015 in the old post-employment plans.

Therefore, both former post-employment plans are closed as of 31 December 2015. An insurance company administers the obligations under that plan. As of that date no further obligations will remain under the former ForFarmers post-employment plan. Under the former Hendrix post-employment plan, for the pension rights accrued up to 31 December 2015, the Group will remain committed to pay the related guarantee premiums and as such accounts for the plan as a defined benefit plan.

From 2016 onwards, pension rights will be accrued under the new plan on the basis of collective defined contribution. Together with this new post-employment plan, the Group has also agreed on a defined contribution plan for employees with a salary above €54,614 (2018). An insurance company will be administering the obligations under both plans as of 1 January 2016.

The net liability related to the defined benefit plans in The Netherlands per 31 December 2018 amounts to €12,653 thousand (31 December 2017: €13,097 thousand). The decrease in this liability is mainly caused by the increase in the interest rate, whereby the change in the financial assumptions was recognized in other comprehensive income.

Germany / Belgium / Poland

The German subsidiaries have, for a limited number of persons, an in-house defined benefit plan that is already closed so no new obligations are being incurred. The commitments were calculated on the basis of actuarial calculations in the course of which the applicable discount rate was taken into account. Actuarial results are recorded directly into equity as other comprehensive income. The German defined benefit plan is unfunded.

In addition to the in-house defined benefit plan, a defined contribution plan is in place for all other employees of the German subsidiaries.

The net liability related to the defined benefit plans in Germany per 31 December 2018 amounts to €4,817 thousand (31 December 2017: €5,149 thousand).

The Belgian subsidiaries have two insured benefit plans for their employees which qualify as defined benefit plans. The net liability related to the defined benefit plans in Belgium per 31 December 2018 amounts to €124 thousand (31 December 2017: €138 thousand).

The Polish subsidiaries do not have a pension plan. In accordance with local regulations the employees receive an one month salary when they retire. 

United Kingdom

In the United Kingdom, two defined benefit plans exist. The first plan relates to (former) employees of BOCM PAULS Ltd., which company was acquired by the Group in 2012. As per 1 October 2006, this plan was closed, so no new obligations are being incurred.

The second plan is a small defined benefit plan that relates to (former) employees of HST Feeds Ltd., which company was acquired by the Group in 2014. Also for this plan no new post-employment rights are being built up. Both defined benefit plans in the United Kingdom are funded plans, for which the funding requirements are based on the pension fund’s actuarial measurement framework set out in the funding policies of the plan.

From October 2006, a new plan exists on the basis of defined contribution. An insurance company administers the obligations under that plan.

The net liability related to the defined benefit plans in the United Kingdom per 31 December 2018 amounts to €11,089 thousand (31 December 2017: €23,302 thousand). The decrease of this liability is mainly caused by the increase in the interest rate, whereby the change in the financial assumptions was recognized in other comprehensive income. Based on a High Court ruling in the United Kingdom pension schemes are required to equalise male and female members' benefits for the effect of guaranteed minimum pensions (GMPs). This resulted in incidental past service costs of €904 thousand, which is recorded in the income statement in 2018.

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B. Movement in net defined benefit (asset) liability

The following table shows a reconciliation from the opening balance to the closing balances for net defined benefit liability and its components.

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The remeasurement gain (actuarial loss/gain and return on plan assets) of €12.0 million (2017: gain €5,158 thousand) after tax amounted to €9,870 thousand (2017: gain €4,168 thousand), see Note 16B. The change in the actuarial 'remeasurement result', compared to 2017, is mainly due to an increase in the discount rate in 2018 (in 2017, there was also an increase in the discount rate) and the return on the plan assets. For none of the defined benefit pension plans, the fair value of the plan assets exceeds the defined benefit obligation.

Based on a High Court ruling in the United Kingdom pension schemes are required to equalise male and female members' benefits for the effect of guaranteed minimum pensions (GMPs). This resulted in incidental past service costs of €904 thousand, which is recorded in the income statement in 2018.

In 2017 the Group agreed to make an additional contri­bution of £10.0 million (€11.7 million) to make up a portion of the deficit in the BOCM PAULS Ltd. pension plan.

C. Plan assets

Periodically, an Asset-Liability Matching study is performed in which the consequences of the strategic investment policies are analysed. Based on market conditions a strategic asset mix has been made between shares, bonds, real estate, cash and other investments in predominantly active markets, which is comprised as follows in the plan assets:

D. Defined benefit obligation

Risk exposure

The defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

Actuarial assumptions

The principal actuarial assumptions at the reporting date (expressed as weighted averages) were the following:

Assumptions regarding future mortality have been based on published statistics and mortality tables:

• The Netherlands (funded plans): AG2018 (2017: AG2016)
• Germany (unfunded plans): RT Heubeck 2018G (2017: RT Heubeck 2005G)
• Belgium (funded plans): MR/FR-5 (2017: ditto)
• UK (funded plans): CMI Mortality Projects Model “CMI_2017” (2017: "CMI_2016")

The current longevities underlying the values of the defined benefit obligation at the reporting date were as follows (expressed as weighted averages):

As at 31 December 2018, the weighted-average duration of the defined benefit obligation was 18.3 years (31 December 2017: 18.0 years).

Sensitivity analysis

Possible changes at the reporting date to one of the relevant actuarial assumptions, which could reasonably be expected, keeping other assumptions constant, would have affected the defined benefit obligation of €262 million (31 December 2017: €285 million) by the amounts shown below:

Employer contributions

The Group expects to pay €3.4 million in contributions to its defined benefit plans in 2019 (for 2018 an amount of €3.4 million was expected).

E. Other long-term service plans

The liabilities and expenses related to other long-term service plans mainly relate to anniversary benefits for employees in The Netherlands, Germany and Belgium and to a long-term incentive plan for the Executive Committee. Furthermore, the Polish employees receive in accordance with local regulations a one month salary when they retire. 

F. Employee benefit expenses

The employee benefit expenses increased by €7.1 million, despite a decrease of €0.4 million due to a currency effect and an increase of €2.6 due to the net effect of acquisitions and divestments. As a result the like-for-like increase amounts to €4.9 million. The increase is caused by the increase of the number of employees and averages salary increases.

The expenses relating to the equity-settled share-based payments relate to the depositary receipts and shares granted to the employees according to the employee participation plans as disclosed under Note 14.

The interest charges related to the defined benefit plans amounting to €924 thousand (2017: €1,083 thousand) are recognised in the finance costs.

Refer to Note 15A for further details on the post-employment plans.

The increase by 329 full-time equivalents is mainly caused by acquisitions, to a large extent Tasomix (Poland), and strenghtening of the organisation (in 2017: increase by 52; due to the further strenghtening of the organisation and related to the increase in sales volume).