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Annual Report 2021
Annual Report 2021
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6 Employees

6.1 Personnel expenses
In CHF million   2021   2020
Salaries   3 634   3 579
Cost of defined benefit plans   66   75
Cost of defined contribution plans   93   70
Share-based payments   19   33
Other personnel expenses   331   307
Total personnel expenses   4 143   4 064

Salaries are comprised primarily of wages and cash bonuses, while other personnel expenses mainly consist of social security and insurance benefits.

6.2 Post-employment benefits

Defined contribution plans

Contributions are paid to publicly or privately administered pension plans on a statutory, contractual, or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as personnel expenses. In respect of these plans, no assets or liabilities are recognized in the balance sheet.

Defined benefit plans

The defined benefit plans are covered by funds from separate legal entities or are funded directly by the Group. The aggre­gate of the present value of the defined benefit obligation and the fair value of plan assets for each plan is recognized in the balance sheet as a net employee benefit liability or a net employee benefit asset. The defined benefit obligation is determ­ined annually by independent actuaries using the projected unit credit method. Plan assets are not available to the Group’s creditors.

Pension costs consist of service costs, net interest, and re­measurements of employee benefits. Service costs are included in personnel expenses, net interest is recorded in the finan­cial result, and remeasurement gains and losses from the actuarial valuation are recorded in OCI.

The largest defined benefit plans exist in Switzerland and the USA.

2021   2020
In CHF million   Switzerland   USA   Switzerland   USA
Fair value of plan assets   2 530   167   2 322   183
Present value of defined benefit obligation   2 266   216   2 404   232

Together, they account for 89% of the Group’s total defined benefit obligation and 96% of its plan assets (previous year: 89% and 96%, respectively). Plan participants are insured against the financial conse­quences of old age, disability, and death. Actuarial reports are drawn up annually in accordance with local requirements.

In the reporting year, the positive market development led to a net defined benefit asset for the pension plan in Switzerland. An asset ceiling equal to the employer contribution reserve of CHF 22 million is recognized. The impact of the change in asset ceiling of CHF 242 million is recognized in OCI.

Unfunded defined benefit plans mainly exist in Germany, France, and Austria.

Pension plans in Switzerland

The pension plans are governed by the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), which states that pension plans are to be managed by independent, separate legal entities. It also stipulates that a pension plan’s most senior governing body, the Board of Trustees, must be composed of equal numbers of employee and employer representatives. The insurance benefits are subject to regulations, with the BVG specifying the minimum benefits that are to be provided. The final funded status according to the BVG is determined in the first quarter of the following year. According to estimates,the funded status as of December 31, 2021, is 123% (previous year’s estimate: 118%, final status: 118%).

The Schindler Pension Fund has the legal structure of a foundation. All actuarial risks are borne by the foundation. They consist of demographic risks and financial risks and are regularly assessed by the Board of Trustees. Demographic risks include life expectancy, whereas financial risks comprise discount rates, future salary increases, and the return on plan assets. The Board of Trustees defines the investment strategy based on a long-term target asset structure with the aim of ensuring that plan assets and liabilities are aligned in the medium and long term.

Pension plan in the USA

The Schindler Elevator Corporation Retirement Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), which defines minimum standards such as the plan’s statutory minimum funded status. Contributions to the pension plan are paid entirely by Schindler Elevator Corporation. Pension entitlements are, to a large extent, insured with the government’s Pension Benefit Guaranty Corporation. The final funded status for the reporting year is determined in the second quarter of the following year. According to estimates, the funded status as of December 31, 2021, is 126% (previous year’s estimate: 122%, final status: 130%).

The Benefit Administration Committee (BAC) is responsible for the internal structure and supervision of the plan. The BAC consists of employees of Schindler Elevator Corporation, the majority of whom are members of the Executive Board. The assets are held in a separate legal entity. Since the plan was frozen in 2018, no addi­tional benefit accruals have been provided to active participants. Contributions are instead paid to a defined contribution plan pursuant to Internal Revenue Code 401(k).

Movement in net defined benefit obligation
2021   2020
In CHF million   Defined benefit obligation   Fair value of plan assets   Asset ceiling   Net defined benefit obligation   Defined benefit obligation   Fair value of plan assets   Net defined benefit obligation
January 1   –2 949   2 610   –   –339   –2 959   2 581   –378
thereof arising from funded pension plans   –2 725   2 610   –   –115   –2 726   2 581   –145
thereof arising from unfunded pension plans   –224           –224   –233       –233
                             
Service costs                            
Current service costs   –66           –66   –68       –68
Gains/losses from settlements   –           –   –7       –7
Net interest on employee benefits   –12   8   –   –4   –18   13   –5
Total recognized in the income statement   –78   8   –   –70   –93   13   –80
                             
Actuarial gains (+) / losses (–)                            
Changes in demographic assumptions   86           86   8       8
Changes in financial assumptions   89           89   –69       –69
Experience adjustments   –38           –38   –21       –21
Return on plan assets (excluding interest income)       235       235       128   128
Change in asset ceiling           –242   –242           –
Total remeasurements recognized in OCI   137   235   –242   130   –82   128   46
Exchange differences   –   7   –   7   40   –27   13
Total recognized in OCI   137   242   –242   137   –42   101   59
                             
Employee contributions   –46   46       –   –50   50   –
Employer contributions       51       51       51   51
Benefits paid   161   –149       12   196   –186   10
Business combinations   –1   –       –1   –1   –   –1
Total contributions and other impacts   114   –52       62   145   –85   60
                             
December 31   –2 776   2 808   –242   –210   –2 949   2 610   –339
thereof arising from funded pension plans   –2 568   2 808   –242   –2   –2 725   2 610   –115
thereof arising from unfunded pension plans   –208           –208   –224       –224
                             
Present value of other employee benefits               –27           –27
Total               –237           –366
thereof employee benefit assets               22           –
thereof employee benefit liabilities               –259           –366

Actuarial gains from changes in demographic assumptions relate predominately to the change in mortality table used to value pension plans in Switzerland in the reporting year.

The weighted average duration of the defined benefit obligation is 13.2 years (previous year: 14.6 years).

For the reporting year 2022, the Group expects employer contributions of CHF 48 million to the pension plans in Switzerland, CHF 1 million to the pension plan in the USA, and CHF 8 million to all other plans.

Allocation of plan assets
In CHF million   2021   2020
Equity instruments   826   713
Bonds   648   689
Real estate   836   787
Private equity instruments   229   166
Cash and cash equivalents   49   50
Other assets   220   205
Total   2 808   2 610

Equity instruments, bonds, and cash and cash equivalents are generally valued according to quoted priceson active markets. Other investments generally do not have quoted market prices available. The item Other assets includes commodities and insurance-linked securities.

The outflow of funds due to pension payments and other obligations can be forecast reliably. Contributions are paid regularly to funded pension plans. Furthermore, the various investment strategies take account of the need to guarantee the liquidity of the plans at all times. The Group does not make use of any assets held by pension plans.

Significant actuarial assumptions

The present value of the defined benefit obligation is determined annually by independent actuaries using the projected unit credit method.

The discount rate and the future increase in salaries were identified as signif­icant assumptions for the pension plans in Switzerland. For the pension plan in the USA, only the discount rate is considered a significant actuarial assumption, as the plan is frozen and no additional benefit accruals are provided to active participants.

The significant assumptions are as follows:

2021   2020
In %   Switzerland   USA   Switzerland   USA
Discount rate   0.30   2.78   0.10   2.43
Increase in salaries   1.00   –   1.00   –

The mortality assumptions for Switzerland are based on the mortality table BVG 2020 CMI 1.25% (previous year: BVG 2015 CMI 1.25%) and for the USA based on the mortality table PRI-2012 FG + MP2021 (previous year: PRI-2012 FG + MP2020).

The following impacts on the defined benefit obligation would result from changes in actuarial assumptions:

    2021   2020
Discount rate
0.25% increase   –3.50%   –3.50%
0.25% decrease   3.50%   3.50%
         
Increase in salaries        
1.00% increase   1.00%   1.00%
1.00% decrease   –1.00%   –1.00%

The sensitivity analysis is based on reasonably possible changes as of December 31, 2021. Each change in a significant actuarial assumption was analyzed separately as part of the analysis. Interdependencies were not considered.

6.3 Share-based payments

The fair value of share-based payments is determined at grant date. The amount for share-based payments is subsequently recognized over the vesting period as personnel expenses, with an increase in equity based on the number of shares expected to vest and any true-up.

Share-based payments are settled with treasury shares. No additional registered shares or participation certificates are issued.

The Group has the following share-based payment plans in place:

Current plans Previous plans
    Performance Share Plan (PSP)   Bonus Share Plan (BSP)   Deferred Share Plan (DSP) 2015   Capital Participation Plans 2000/2003
Year of implementation   2013   2013   2015   Replaced by PSP and BSP in 2013
Instruments used   Registered shares or participation certificates   Registered shares or participation certificates   Performance Share Units (PSUs)   Options and registered shares or participation certificates
Beneficiaries   Members of the Supervisory and Strategy Committee   Group management (approximately 500 employees)   Group Executive Committee   Group management (approximately 500 employees)

Previous plans are still disclosed as the exercise periods of granted options will only end in future years.

Performance and Bonus Share Plans (PSP and BSP)

The Board of Directors determines the specific conditions of the plans, including the provisional number of shares granted, the applicable vesting conditions, and the beneficiaries of the plans. Vesting conditions are service-related and targets are based on non-market performance conditions only. The allocated shares are transferred to the ownership of the beneficiaries once the vesting conditions have been met and include all associated rights. The shares may not be disposed of for a period of three years.

In the reporting year, a provisional number of 70 357 shares was granted under the plans at their grant date fair value of CHF 242.60 per share. The final number of shares will be allocated in April 2022 based on the extent to which bonus targets are achieved.

In April 2021, personnel expenses were adjusted by the final number of shares allocated for the previous year of 53 949 at their grant date fair value of CHF 239.10 per share.

Deferred Share Plan (DSP) 2015

The Board of Directors determines a number of Performance Share Units (PSUs) to be granted based on a contractual target amount. Each PSU gives the beneficiary the right to a still-to-be-determined number of shares. At the start of the reporting year, a combination of growth and profitability targets is set for the next three years. The targets set are based on non-market conditions only. After the three-year vesting period, the achievement of those targets is determined, and the PSUs are converted at a conversion rate of between 0% and 300%. The maximum value of the converted shares is three times the contractual target amount. The converted shares are transferred to the ownership of the beneficiaries and include all of the associated rights. In the event of any qualified breaches of the Schindler Code of Conduct, the beneficiary forfeits the right to have the PSUs converted.

In the reporting year, 22 697 PSUs were granted, based on the contractual target amount (previous year: 30 105 PSUs). Personnel expenses are recognized over the vesting period. The grant date fair value of CHF 226.33 (previous year: CHF 220.12) corresponds to the share price at grant date less the present value of the expected dividends over the vesting period.

Previous plans

In April 2013, options were allocated for the last time under the Capital Participation Plans 2000/2003. After three years, they were transferred to the unrestricted ownership of the beneficiaries, provided they had remained with the Group throughout this period. An exercise period of six years subsequently applies. Issued options allow for the purchase of shares and are not settled with cash or cash equivalents.

Options granted under previous plans, for which the exercise periods end in the future, are outlined in the table below:

    2013
Options allocated   138 012
Exercised/expired in previous years   –101 429
Outstanding as of January 1, 2021   36 583
Options exercised/expired   –15 375
Balance as of December 31, 2021   21 208
Exercisable   21 208
Entitles holder to purchase (allocation ratio 1:1)   Shares
Exercise price   137.84
Exercise period ends   30.4.2022
Weighted average share price on exercise in 2020   235.66
Weighted average share price on exercise in 2021   227.46
6.4 Key management compensation
In CHF million   2021   2020
Salaries   21   19
Contributions to pension plans and social security benefits   5   5
Share-based payments   9   8
Total   35   32

The table above sets out the compensation awarded to the executive members of the Board of Directors and members of the Group Executive Committee. They receive fixed compensation as well as performance-­related variable compensation. Salaries include cash bonuses and lump-sum expenses.

Additionally, fees and expenses paid to members of the Board of Directors of Schindler Holding Ltd. totaled CHF 3 million (previous year: CHF 3 million).