Employee Benefits Explained

Employee benefits are all types of remuneration paid by a company in exchange for the work performed by employees.

The short-term benefits for employees are employee benefits (other than the benefits due to employees for termination of the employment relationship) which must be paid within twelve months of the end of the year in which the employees have performed the related work .

The post-employment benefits are benefits for employees (other than the benefits due to employees for the termination of the employment relationship) due after the conclusion of the employment relationship. Programs for post-employment benefits are formalized or non-formalized agreements, by virtue of which the company provides benefits to one or more employees after the end of the employment relationship. The defined contribution plans are post-employment benefit plans based on which the company pays contributions fixed to a distinct entity (a fund) and will not have a legal or implicit obligation to pay further contributions if the fund does not have sufficient assets to pay all employee benefits related to work performed in the current and previous years. Defined benefit plans are plans for post-employment benefits other than defined contribution plans. Programs common to several companies are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) which: Defined benefit plans are plans for post-employment benefits other than defined contribution plans. Programs common to several companies are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) which: Defined benefit plans are plans for post-employment benefits other than defined contribution plans. Programs common to several companies are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) which:

(a) combine the activities conferred by different companies not subject to common control; is

(b) use these activities to provide benefits to employees of different companies by determining the levels of contributions and benefits regardless of the identity of the company that employs the employees concerned.

The other long-term benefits for employees are employee benefits (other than benefits subsequent to the end of the employment relationship and benefits due to employees for termination of the employment relationship) that must not be liquidated within the twelve months following the end of the year in which the employees performed the related work. The benefits due to employees for termination of the employment relationship are represented by employee benefits due later on:

(a) the company’s decision to terminate an employee’s employment before the normal retirement date; or

(b) the employee’s decision to accept voluntary resignation in exchange for such compensation. The benefits accrued by employees are benefits that do not depend on future work activity. The present value of a defined benefit obligation is the present value, without deduction of any asset servicing the plan, of the future payments envisaged as necessary to extinguish the obligation deriving from the work carried out by the employee in the current year and in previous ones. The social security cost relating to current employment services is the increase in the current value of defined-benefit obligations resulting from the work carried out by the employee in the current year. Interest expense is the increase that the present value of a defined benefit obligation undergoes in a financial year due to the fact that the date of payment of the benefit becomes closer than one year. Plan service activities include:

(a) assets held by a long-term employee benefit fund; is

(b) insurance policies (*) that meet the required characteristics. The assets held by a long-term employee benefit fund are assets (other than non-transferable financial instruments issued by the reporting company) that:

(a) are held by an entity (a fund) legally distinct from the reporting enterprise and which exists solely to pay or set aside employee benefits; is

(b) may be used, exclusively, to pay or set aside employee benefits, they are not available to creditors of the company that prepares the financial statements (even in the event of bankruptcy) and cannot be returned to the company that prepares the budget, unless:

(i) the remaining assets of the fund are sufficient to satisfy all the obligations of the plan or of the company that prepares the financial statements relating to employee benefits; or

(ii) the assets are returned to the company that prepares the financial statements in order to reimburse them for the benefits already paid. The insurance policy that meets the requirements is a policy issued by an insurance company that is not a related party (as defined in IAS 24, Financial Statement Information on Transactions with Related Parties) of the company that prepares the financial statements if the fees of the policy :

(a) may only be used to pay or set aside employee benefits based on a defined benefit plan;

(b) are not available to creditors of the company preparing the financial statements (even in the event of bankruptcy) and cannot be returned to the company that prepares the financial statements, unless:

(i) the fees represent a surplus of assets not necessary for the insurance company to meet all the obligations relating to employee benefits; or

(ii) the fees are reimbursed to the company that prepares the financial statements only to reimburse the benefits for the employees already paid. Fair value is the amount for which an asset can be exchanged, or a liability settled in a free transaction between knowledgeable, independent parties.

The return on assets serving a pension plan is given by the interest, dividends and other revenues deriving from the plan assets together with realized or unrealized gains or losses on plan assets minus administration costs of the plan (other than those in the actuarial assumptions used to evaluate the obligation for defined benefits) and any tax due on the plan itself. Actuarial gains and losses include:

(a) adjustments based on past experience (the effects of the differences between the previous actuarial assumptions and what has actually occurred); is

(b) the effects of changes in the actuarial assumptions.

The cost relating to past work services is the change in the current value of the obligations for defined benefits relating to the work performed by the employee in previous years. The variation derives, in the current year from the introduction or modification of benefits subsequent to the end of the employment relationship or other long-term benefits for employees. The cost of past work services can have a positive sign (when the introduction or modification of benefits determines an increase in the present value of the obligation for defined benefits) or negative (when the change in existing benefits leads to a reduction in the current value) of the defined benefit obligation).

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