6 Employees
6.1 Personnel expenses
| In CHF million | 2023 | 2022 | ||
|---|---|---|---|---|
| Salaries | 3 695 | 3 702 | ||
| Cost of defined benefit plans | 41 | 56 | ||
| Cost of defined contribution plans | 92 | 98 | ||
| Share-based payments | 18 | 24 | ||
| Other personnel expenses | 454 | 410 | ||
| Total personnel expenses | 4 300 | 4 290 |
Salaries mainly comprise wages and cash bonuses, while other personnel expenses consist primarily of social security and insurance contributions.
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.
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In CHF million | Switzerland | USA | Switzerland | USA | ||||
| Fair value of plan assets | 2 377 | 102 | 2 327 | 121 | ||||
| Asset ceiling | –296 | –374 | ||||||
| Present value of defined benefit obligation | 2 059 | 147 | 1 931 | 160 | ||||
| Net defined benefit asset/liability | 22 | –45 | 22 | –39 | ||||
Together, they account for 90% of the Group’s total defined benefit obligation and 97% of its plan assets (previous year: 90% and 97%, respectively). Plan participants are insured against the financial consequences of old age, disability, and death. Actuarial reports are prepared annually in accordance with local requirements.
In the reporting year, an improved return on the plan assets is offset by the impact of a lower discount rate, which resulted in a decrease in the asset ceiling for the pension plan in Switzerland. A net defined benefit asset equal to the employer contribution reserve of CHF 22 million (previous year: CHF 22 million) is recognized. The impact of the change in the asset ceiling of CHF –86 million (previous year: CHF 132 million) is recognized in OCI.
Unfunded defined benefit plans mainly exist in Austria, France, Germany, and the USA.
Pension plan in Switzerland
The pension plan is 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, 2023, is 121% (previous year’s estimate: 116%, final status: 116%).
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, while 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, 2023, is 89% (previous year’s estimate: 84%, final status: 83%). The methodology to assess the funded status has been revised in the reporting year. The previous year’s information was adjusted accordingly.
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
| 2023 | 2022 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | Asset ceiling | Net defined benefit obligation | ||||||||
| January 1 | –2 324 | 2 526 | –374 | –172 | –2 776 | 2 808 | –242 | –210 | ||||||||
| thereof arising from funded pension plans | –2 148 | 2 526 | –374 | 4 | –2 568 | 2 808 | –242 | –2 | ||||||||
| thereof arising from unfunded pension plans | –176 | –176 | –208 | –208 | ||||||||||||
| Service costs | ||||||||||||||||
| Current service costs | –41 | –41 | –56 | –56 | ||||||||||||
| Net interest on employee benefits | –58 | 58 | –8 | –8 | –19 | 14 | – | –5 | ||||||||
| Total recognized in the income statement | –99 | 58 | –8 | –49 | –75 | 14 | – | –61 | ||||||||
| Actuarial gains (+) / losses (–) | ||||||||||||||||
| Changes in demographic assumptions | –2 | –2 | –1 | –1 | ||||||||||||
| Changes in financial assumptions | –173 | –173 | 523 | 523 | ||||||||||||
| Experience adjustments | 20 | 20 | –97 | –97 | ||||||||||||
| Return on plan assets (excluding interest income) | 34 | 34 | –259 | –259 | ||||||||||||
| Change in asset ceiling | 86 | 86 | –132 | –132 | ||||||||||||
| Total remeasurements recognized in OCI | –155 | 34 | 86 | –35 | 425 | –259 | –132 | 34 | ||||||||
| Exchange differences | 27 | –17 | 10 | 7 | –1 | 6 | ||||||||||
| Total recognized in OCI | –128 | 17 | 86 | –25 | 432 | –260 | –132 | 40 | ||||||||
| Employee contributions | –45 | 45 | – | –45 | 45 | – | ||||||||||
| Employer contributions | 49 | 49 | 48 | 48 | ||||||||||||
| Benefits paid | 157 | –141 | 16 | 141 | –129 | 12 | ||||||||||
| Business combinations | –1 | – | –1 | –1 | – | –1 | ||||||||||
| Total contributions and other impacts | 111 | –47 | 64 | 95 | –36 | 59 | ||||||||||
| December 31 | –2 440 | 2 554 | –296 | –182 | –2 324 | 2 526 | –374 | –172 | ||||||||
| thereof arising from funded pension plans | –2 265 | 2 554 | –296 | –7 | –2 148 | 2 526 | –374 | 4 | ||||||||
| thereof arising from unfunded pension plans | –175 | –175 | –176 | –176 | ||||||||||||
| Present value of other employee benefits | –25 | –25 | ||||||||||||||
| Total | –207 | –197 | ||||||||||||||
| thereof employee benefit assets | 22 | 22 | ||||||||||||||
| thereof employee benefit liabilities | –229 | –219 | ||||||||||||||
The weighted average duration of the defined benefit obligation is 12.3 years (previous year: 11.7 years).
For the reporting year 2024, the Group expects employer contributions of CHF 46 million to the pension plan in Switzerland, CHF 1 million to the pension plan in the USA, and CHF 10 million to all other plans.
Allocation of plan assets
| In CHF million | 2023 | 2022 | ||
|---|---|---|---|---|
| Equity instruments | 697 | 645 | ||
| Bonds | 549 | 536 | ||
| Real estate | 812 | 843 | ||
| Private equity instruments | 222 | 235 | ||
| Cash and cash equivalents | 63 | 73 | ||
| Other assets | 211 | 194 | ||
| Total | 2 554 | 2 526 |
Equity instruments, bonds, and cash and cash equivalents are generally valued according to quoted prices in active markets. Other assets 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, the future increase in salaries and the life expectancy were identified as significant actuarial assumptions for the pension plan in Switzerland. For the pension plan in the USA, only the discount rate and the life expectancy are considered significant actuarial assumptions, as the plan is frozen and no additional benefit accruals are provided to active participants.
The significant assumptions are as follows:
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| Switzerland | USA | Switzerland | USA | |||||
| Discount rate in % | 1.40 | 4.81 | 2.20 | 5.01 | ||||
| Increase in salaries in % | 1.50 | – | 1.50 | – | ||||
| Life expectancy 65-year-old male in years | 22 | 21 | 22 | 21 | ||||
| Life expectancy 65-year-old female in years | 24 | 22 | 24 | 23 | ||||
The life expectancy assumptions for Switzerland are based on the mortality table BVG 2020 CMI 1.25% (previous year: BVG 2020 CMI 1.25%) and the assumptions for the USA are based on the mortality table PRI-2012 FG + MP2021 (previous year: PRI-2012 FG + MP2021).
The following impacts on the defined benefit obligation would result from changes in actuarial assumptions:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Discount rate | ||||
| 0.25% increase | –3.20% | –2.80% | ||
| 0.25% decrease | 3.20% | 2.80% | ||
| Increase in salaries | ||||
| 1.00% increase | 1.60% | 1.60% | ||
| 1.00% decrease | –1.60% | –1.60% | ||
| Life expectancy | ||||
| 1 year increase | 2.80% | 2.60% | ||
| 1 year decrease | –2.80% | –2.60% | ||
The sensitivity analysis is based on reasonably possible changes as of December 31, 2023. 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:
| Plan | Year of implementation | Instruments granted | Beneficiaries | |||
|---|---|---|---|---|---|---|
| Performance Share Plan (PSP) | 2013 | Registered shares or participation certificates | Members of the Supervisory and Strategy Committee | |||
| Bonus Share Plan (BSP) | 2013 | Registered shares or participation certificates | Group senior management (approximately 500 employees) | |||
| Deferred Share Plan (DSP) | 2015, 2023 | Performance Share Units (PSUs) | Group Executive Committee | |||
| Long-term Incentive Plan (LTI) | 2023 | Performance Share Units (PSUs) | Selected senior managers (approximately 170 employees) |
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 after grant.
In the reporting year, a provisional number of 82 252 shares was granted under the plans at their grant date fair value of CHF 171 per share. The final number of shares will be allocated in April 2024 based on the extent to which bonus targets are achieved.
In April 2023, personnel expenses were adjusted by the final number of shares allocated for the previous year of 70 682 at their grant date fair value of CHF 246 per share.
Deferred Share Plan (DSP) 2015/2023 and Long-term Incentive Plan (LTI)
The Board of Directors determines a number of Performance Share Units (PSUs) to be granted based on a target amount. Each PSU gives the beneficiary the right to a still-to-be-determined number of shares. At the start of each reporting year, a combination of growth, profitability, and ESG 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 target amount for the DSP. 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, 24 203 PSUs were granted under the DSP, based on the contractual target amount (previous year: 19 428 PSUs). Under the LTI, 43 650 PSUs were granted to the beneficiaries in 2023 for the first time.
Personnel expenses are recognized over the vesting period. The grant date fair value of the DSP amounts to CHF 163 (previous year: CHF 230) and the grant date fair value of the LTI amounts to CHF 183. The grant date fair values correspond to the share prices at grant date less the present value of the expected dividends over the vesting period.
6.4 Key management compensation
| In CHF million | 2023 | 2022 | ||
|---|---|---|---|---|
| Salaries | 26 | 23 | ||
| Contributions to pension plans and social security benefits | 5 | 6 | ||
| Share-based payments | 8 | 6 | ||
| Total | 39 | 35 |
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).