| Employees | 4. Employees 4A. Staff and management costs € million € million € million Staff costs 2023 2022 2021 Wages and salaries (5,722) (5,857) (5,062) Social security costs (591) (587) (529) Other pension costs (348) (396) (401) Share-based compensation costs (212) (177) (161) (6,873) (7,017) (6,153) ‘000 ‘000 ‘000 Average number of employees during the year (a) 2023 2022 2021 Asia Pacific Africa 64 73 84 The Americas 38 38 37 Europe 26 27 28 128 138 149 (a) Reduction in average number of employees is primarily driven by disposal of ekaterra in 2022. € million € million € million Key management compensation 2023 2022 2021 Salaries and short-term employee benefits (41) (41) (29) Share-based benefits (a) (13) (15) (10) (54) (56) (39) Of which: Executive Directors (13) (12) (8) Other (b) (41) (44) (31) Non-Executive Directors’ fees (2) (2) (2) (56) (58) (41) (a) Share-based benefits are expenses recognised for the period. Share-based benefits compensation on a vesting basis is €8 million (2022: €12 million; 2021: €6 million). (b) Other includes all members of the Unilever Leadership Executive, other than Executive Directors. Key management are defined as the members of Unilever Leadership Executive (ULE) and the Non-Executive Directors. Compensation for ULE members are pro-rated based on time actively spent in a ULE role. In addition to the above, €11 million was recognised in 2023 relating to members of the ULE who have either left, or where it has been announced that they will leave during the year. 4B. Pensions and similar obligations For defined benefit plans, operating and finance costs are recognised separately in the income statement. The amount charged to operating cost in the income statement is the cost of accruing pension benefits promised to employees over the year, administration costs (other than costs of managing plan assets), plus the costs of individual events such as past service benefit changes, settlements and curtailments (such events are recognised immediately in the income statement). The amount charged or credited to finance costs is a net interest expense calculated by applying the liability discount rate to the surplus or deficit. Any differences between the expected interest on assets and the return actually achieved, and any changes in the liabilities over the year due to changes in assumptions or experience within the plans, are recognised immediately in the statement of comprehensive income. The defined benefit plan surplus or deficit on the balance sheet comprises the total for each plan of the fair value of plan assets less the present value of the defined benefit liabilities (using a discount rate based on high-quality corporate bonds, or a suitable alternative where there is no active corporate bond market) adjusted for irrecoverable surpluses. All defined benefit plans are subject to regular actuarial review using the projected unit method by external consultants. The Group policy is that the most material plans, representing approximately 82% of the defined benefit liabilities, are formally valued every year. Other material plans, accounting for a further 14% of the liabilities, have their liabilities updated each year. Group policy for the remaining plans requires a full actuarial valuation at least every three years. Asset values for all plans are updated every year. For defined contribution plans, the charges to the income statement are the company contributions payable, as the company’s obligation is limited to the contributions paid into the plans. The assets and liabilities of such plans are not included in the balance sheet of the Group. Description of plans The Group increasingly operates a number of defined contribution plans, the assets of which are held in external funds. In certain countries, the Group operates defined benefit pension plans based on employee pensionable remuneration and length of service. The majority of defined benefit plans are either career average, final salary or hybrid plans and operate on a funded basis with assets held in external funds. Benefits are determined by the plan rules and are linked to inflation in some countries. Our largest plans are in the UK and the Netherlands. In the UK, we operate a career average defined benefit plan (with a salary limit for benefit accrual) which is closed to new entrants from October 2021, and a defined contribution plan. In the Netherlands, we operate a collective defined contribution plan for all new benefit accrual and a closed career average defined benefit plan for benefits built up to April 2015. The Group also provides other post-employment benefits, mainly post-employment healthcare plans in the US, closed to new entrants from January 2014. These plans are predominantly unfunded. Governance The majority of the Group’s externally funded plans are established as trusts, foundations or similar entities. The operation of these entities is governed by local regulations and practice in each country, as is the nature of the relationship between the Group and the Trustees (or equivalent) and their composition. Where Trustees (or equivalent) are in place to operate plans, they are generally required to act on behalf of the plan’s stakeholders. They are tasked with periodic reviews of the solvency of the plan in accordance with local legislation and play a role in the long-term investment and funding strategy. The Group also has an internal body, the Pensions and Equity Committee, that is responsible for setting the company’s policies and decision-making on plan matters, including but not limited to design, funding, investments, risk management and governance. Investment strategy The Group’s investment strategy in respect of its funded plans is implemented within the framework of the various statutory requirements of the territories where the plans are based. The Group has developed policy guidelines for the allocation of assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Group of the benefits provided. To achieve this, investments are diversified, such that the failure of any single investment should not have a material impact on the overall level of assets. The plans expose the Group to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and, in certain countries, inflation risk. There are no unusual entity or plan-specific risks to the Group. The plans invest a reducing proportion of assets in equities and, for risk control, an increasing proportion in liability matching assets (bonds). There are also investments in property and other alternative assets; additionally, the Group uses derivatives to further mitigate the impact of the risks outlined above. However, the portfolio leverage is relatively low. The majority of assets are managed by a number of external fund managers with a small proportion managed in-house. Unilever has a pooled investment vehicle (Univest) which it believes offers its pension plans around the world a simplified externally managed investment vehicle to implement their strategic asset allocation models, currently for bonds, equities and alternative assets. The aim is to provide high-quality, well diversified, cost-effective, risk-controlled vehicles. The pension plans’ investments are overseen by Unilever’s internal investment company, the Univest Company. Assumptions With the objective of presenting the assets and liabilities of the pensions and other post-employment benefit plans at their fair value on the balance sheet, assumptions under IAS 19 are set by reference to market conditions at the valuation date. The actuarial assumptions used to calculate the benefit liabilities vary according to the country in which the plan is situated. The following table shows the assumptions, weighted by liabilities, used to value the principal defined benefit plans (representing approximately 96% of total pension liabilities and other post-employment benefit liabilities). 31 December 2023 31 December 2022 Defined benefit Other post- employment Defined benefit Other post- employment Discount rate 4.4 % 5.9 % 4.6 % 5.9 % Inflation 2.8 % n/a 2.8 % n/a Rate of increase in salaries 3.4 % 2.9 % 3.3 % 3.0 % Rate of increase for pensions in payment (where provided) 2.6 % n/a 2.4 % n/a Rate of increase for pensions in deferment (where provided) 2.8 % n/a 2.6 % n/a Long-term medical cost inflation n/a 5.5 % n/a 5.1 % For the most material other post-employment benefit plan in the US a higher initial level of medical cost inflation is assumed which falls from the initial rate of 7% to the long-term rate of 5% after 8 years. Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans. 4B. Pensions and similar obligations continued For the UK and Netherlands pension plans, representing approximately 66% of all defined benefit pension liabilities, the assumptions used at 31 December 2023 and 2022 were: United Kingdom Netherlands 2023 2022 2023 2022 Discount rate 4.7 % 5.0 % 3.2 % 3.7 % Inflation 3.0 % 3.1 % 2.1 % 2.2 % Rate of increase in salaries 3.6 % 3.6 % 2.6 % 2.7 % Rate of increase for pensions in payment (where provided) 2.8 % 2.9 % 2.1 % 2.2 % Rate of increase for pensions in deferment (where provided) 2.8 % 2.9 % 2.1 % 2.2 % Number of years a current pensioner is expected to live beyond age 65: Men 21.5 21.8 21.9 21.8 Women 23.1 23.6 24.1 24.0 Number of years a future pensioner currently aged 45 is expected to live beyond age 65: Men 22.4 22.9 23.9 23.8 Women 24.2 24.8 26.1 26.0 Demographic assumptions, such as mortality rates, are set having regard to the latest trends in life expectancy (including expectations of future improvements), plan experience and other relevant data. These assumptions are reviewed and updated as necessary as part of the periodic actuarial valuation of the pension plans. The years of life expectancy for 2023 above have been translated from the following tables: UK : Standard life expectancy tables Series S3, adjusted to reflect the experience of our plan members analysed as part of the 2022 actuarial valuation. Future improvements in longevity have been allowed for in line with the core CMI 2022 Mortality Projections Model with a 1% p.a. long-term improvement rate. Netherlands: The Dutch Actuarial Society’s AG Prognosetafel 2022 table is used with correction factors (2020) to allow for the typically longer life expectancy for fund members relative to the general population. This table has an in-built allowance for future improvements in longevity. The impact from changes to the assumptions of the remaining defined benefit plans are considered immaterial. Their assumptions vary due to a number of factors including the currency and long-term economic conditions of the countries where they are situated. Income statement The charge to the income statement comprises: € million € million € million Notes 2023 2022 2021 Charged to operating profit: Defined benefit pension and other benefit plans: Gross service cost (128) (186) (228) Employee contributions 11 12 13 Special termination benefits (14) (11) (15) Past service cost including (losses)/gains on curtailments 3 – 18 Settlements 2 1 1 Defined contribution plans (222) (212) (190) Total operating cost 4A (348) (396) (401) Finance income/(cost) (a) 5 110 44 (10) Net impact on the income statement (before tax) (238) (352) (411) (a) This includes the impact of interest on asset ceiling. Statement of comprehensive income Amounts recognised in the statement of comprehensive income on the remeasurement of the surplus/(deficit). € million € million € million 2023 2022 2021 Return on plan assets excluding amounts included in net finance income/(cost) 131 (6,483) 1,958 Change in asset ceiling excluding amounts included in finance cost (6) (184) (17) Actuarial gains/(losses) arising from changes in demographic assumptions 98 (24) (4) Actuarial gains/(losses) arising from changes in financial assumptions (552) 6,914 342 Experience gains/(losses) arising on pension plan and other benefit plan liabilities (416) (760) 126 Total of defined benefit costs recognised in other comprehensive income (745) (537) 2,405 4B. Pensions and similar obligations continued Balance sheet The assets, liabilities and surplus/(deficit) position of the pension and other post-employment benefit plans at the balance sheet date were: € million 2023 € million 2022 Pension plans Other post- employment Pension plans Other post- employment Fair value of assets 20,174 4 19,361 6 Present value of liabilities (17,174) (348) (16,199) (365) Computed surplus/(deficit) 3,000 (344) 3,162 (359) Irrecoverable surplus (a) (255) – (234) – Surplus/(deficit) 2,745 (344) 2,928 (359) Of which in respect of: Funded plans in surplus: Liabilities (13,739) – (12,030) – Assets 17,775 – 16,524 – Aggregate surplus 4,036 – 4,494 – Irrecoverable surplus (a) (255) – (234) – Surplus/(deficit) 3,781 – 4,260 – Funded plans in deficit: Liabilities (2,715) (39) (3,417) (39) Assets 2,399 4 2,837 6 Surplus/(deficit) (316) (35) (580) (33) Unfunded plans: Pension liability (720) (309) (752) (326) (a) A surplus is deemed recoverable to the extent that the Group is able to benefit economically from the surplus. Unilever assesses the maximum economic benefit available through a combination of refunds and reductions in future contributions in accordance with local legislation and individual financing arrangements with each of our funded defined benefit plans. Reconciliation of change in assets and liabilities The group of plans within ‘Rest of world’ category in the tables below are not materially different with respect to their risks that would require disaggregated disclosure. Movements in assets during the year: Rest of € million Rest of € million UK Netherlands world 2023 Total UK Netherlands 2022 Total 1 January fair value of assets 8,704 5,343 5,320 19,367 14,332 6,099 6,262 26,693 1 January irrecoverable surplus – – (234) (234) – – (50) (50) 1 January (after irrecoverable surplus) 8,704 5,343 5,086 19,133 14,332 6,099 6,212 26,643 Employee contributions – – 11 11 1 – 11 12 Settlements – – (1) (1) – – – – Actual return on plan assets (excluding amounts in net finance income/charge) (227) 146 212 131 (4,870) (668) (945) (6,483) Change in asset ceiling excluding amounts included in interest expenses – – (6) (6) – – (184) (184) Interest income (a) 432 194 233 859 264 66 166 496 Employer contributions 50 9 348 407 66 8 229 303 Benefit payments (459) (178) (485) (1,122) (511) (161) (512) (1,184) Other (b) – – 371 371 – (1) (1) (2) Currency retranslation 179 – (39) 140 (578) – 110 (468) 31 December (after irrecoverable surplus) 8,679 5,514 5,730 19,923 8,704 5,343 5,086 19,133 31 December irrecoverable surplus – – (255) (255) – – (234) (234) 31 December fair value of assets 8,679 5,514 5,985 20,178 8,704 5,343 5,320 19,367 (a) This includes the impact of interest on asset ceiling. (b) The majority of 'Other' during 2023 is explained by reclassification of India HUL and GSK Provident Funds from Defined Contribution to Defined Benefit reporting adding €368 million to both assets and liabilities at year end 2023. The impact on the overall (deficit)/surplus is nil. 4B. Pensions and similar obligations continued Movements in liabilities during the year: Rest of € million Rest of € million UK Netherlands world 2023 Total UK Netherlands 2022 Total 1 January (6,838) (3,734) (5,992) (16,564) (11,453) (4,937) (7,260) (23,650) Gross service cost (42) (5) (81) (128) (86) (4) (96) (186) Special termination benefits – – (14) (14) – – (11) (11) Past service costs including losses/(gains) on curtailments – – 3 3 – – – – Settlements – – 3 3 – – 1 1 Interest cost (335) (135) (279) (749) (210) (54) (188) (452) Actuarial gain/(loss) arising from changes in demographic assumptions 104 – (6) 98 1 (50) 25 (24) Actuarial gain/(loss) arising from changes in financial assumptions (243) (236) (73) (552) 4,196 1,527 1,191 6,914 Actuarial gain/(loss) arising from experience adjustments (220) (99) (97) (416) (276) (377) (107) (760) Benefit payments 459 178 485 1,122 511 161 512 1,184 Other (a) – – (371) (371) – – 15 15 Currency retranslation (135) – 181 46 479 – (74) 405 31 December (7,250) (4,031) (6,241) (17,522) (6,838) (3,734) (5,992) (16,564) (a) The majority of 'Other' during 2023 is explained by reclassification of India HUL and GSK Provident Funds from Defined Contribution to Defined Benefit reporting adding €368 million to both assets and liabilities at year end 2023. The impact on the overall (deficit)/surplus is nil. Movements in (deficit)/surplus during the year: Rest of € million Rest of € million UK Netherlands world 2023 Total UK Netherlands world 2022 Total 1 January 1,866 1,609 (906) 2,569 2,879 1,162 (1,048) 2,993 Gross service cost (42) (5) (81) (128) (86) (4) (96) (186) Employee contributions – – 11 11 1 – 11 12 Special termination benefits – – (14) (14) – – (11) (11) Past service costs including losses/(gains) on curtailments – – 3 3 – – – – Settlements – – 2 2 – – 1 1 Actual return on plan assets (excluding amounts in net finance income/charge) (227) 146 212 131 (4,870) (668) (945) (6,483) Change in asset ceiling excluding amounts included in interest expenses – – (6) (6) – – (184) (184) Interest cost (335) (135) (279) (749) (210) (54) (188) (452) Interest income (a) 432 194 233 859 264 66 166 496 Actuarial gain/(loss) arising from changes in demographic assumptions 104 – (6) 98 1 (50) 25 (24) Actuarial gain/(loss) arising from changes in financial assumptions (243) (236) (73) (552) 4,196 1,527 1,191 6,914 Actuarial gain/(loss) arising from experience adjustments (220) (99) (97) (416) (276) (377) (107) (760) Employer contributions 50 9 348 407 66 8 229 303 Benefit payments – – – – – – – – Other – – – – – (1) 14 13 Currency retranslation 44 – 142 186 (99) – 36 (63) 31 December 1,429 1,483 (511) 2,401 1,866 1,609 (906) 2,569 (a) This includes the impact of interest on asset ceiling. The actual return on recognised plan assets during 2023 was €990 million, being €131 million of asset returns and €859 million of interest income shown in the tables above (2022: €(5,987) million). Movements in irrecoverable surplus during the year: Rest of € million Rest of € million UK Netherlands world 2023 Total UK Netherlands world 2022 Total 1 January – – (234) (234) – – (50) (50) Interest income – – (7) (7) – – 2 2 Change in irrecoverable surplus in excess of interest – – (6) (6) – – (184) (184) Currency retranslations – – (8) (8) – – (2) (2) 31 December – – (255) (255) – – (234) (234) 4B. Pensions and similar obligations continued The duration of the principal defined benefit plan liabilities (representing 96% of total pension liabilities and other post-employment benefit liabilities) and the split of liabilities between different categories of plan participants are: Rest of Rest of UK Netherlands world (a) 2023 Total UK Netherlands world (a) 2022 Total Duration (years) 12 14 10 0 to 22 13 15 11 4 to 18 Active members 7 % 7 % 23 % 12 % 8 % 8 % 19 % 11 % Deferred members 31 % 38 % 14 % 27 % 31 % 38 % 14 % 28 % Retired members 62 % 55 % 63 % 61 % 61 % 54 % 67 % 61 % (a) Rest of world numbers shown are weighted averages by liabilities. Plan assets The group of plans within ‘Rest of world’ category in the tables below are not materially different with respect to their risks that would require disaggregated disclosure. € million € million 31 December 2023 31 December 2022 UK Netherlands Rest of world 2023 Total UK Netherlands Rest of world 2022 Total Total Pension Plans Assets 8,679 5,514 5,981 20,174 8,704 5,343 5,314 19,361 Equities Total 224 1,095 1,424 2,743 284 983 1,363 2,630 – Europe 43 171 431 645 61 165 440 666 – North America 133 670 617 1,420 160 604 594 1,358 – Other 48 254 376 678 63 214 329 606 Fixed Income Total 6,640 3,521 3,344 13,505 5,757 3,269 2,696 11,722 – Government bonds 4,773 1,461 1,546 7,780 3,795 1,297 1,215 6,307 – Investment grade corporate bonds 791 620 1,197 2,608 871 530 905 2,306 – Other Fixed Income 1,076 1,440 601 3,117 1,091 1,442 576 3,109 Derivatives (237) 145 16 (76) (333) 254 18 (61) Private Equity 559 95 36 690 500 90 40 630 Property and Real Estate 674 321 412 1,407 930 422 387 1,739 Hedge Funds 136 – 69 205 225 – 76 301 Other 683 337 391 1,411 1,341 325 317 1,983 Other Pension Plans – – 289 289 – – 417 417 Other Post-Employment Benefit Plans Assets – – 4 4 – – 6 6 Total Assets 8,679 5,514 5,985 20,178 8,704 5,343 5,320 19,367 The fair values of the above equity and fixed income instruments are determined based on quoted market prices in active markets. The fair value of private equity, properties, derivatives and hedge funds are not based on quoted market prices in active markets. Properties are primarily valued by a professional third party valuer on an open market basis, as defined by the Royal Institute of Chartered Surveyors. The Group uses derivatives and other instruments to hedge some of its exposure to inflation and interest rate risk – the degree of this hedging of liabilities was over 100% for both interest rate and inflation for the UK plan and approximately 90% for interest rate and 20% for inflation for the Netherlands plan at year end. Foreign currency exposures, in part, are also hedged by the use of forward foreign exchange contracts. Assets included in the Other category are cash and insurance contracts which are also unquoted assets. No Unilever securities were held at 31 December 2023. At 31 December 2022, €1 million (0.003% of total plan assets) of Unilever securities were held. Property includes property occupied by Unilever amounting to €80 million and €77 million at 31 December 2023 and 2022 respectively. The pension assets above exclude the assets in a Special Benefits Trust amounting to €33 million (2022: €39 million) to fund pension and similar obligations in the US (see also note 17A on page 216 Sensitivities The sensitivity of the overall pension liabilities to changes in the weighted key assumptions are: Change in liabilities Change in assumption UK Netherlands Total Discount rate Increase by 0.5% -6 % -7 % -5 % Inflation rate Increase by 0.5% 4 % 8 % 5 % Life expectancy Increase by 1 year 4 % 4 % 4 % Long-term medical cost inflation (a) Increase by 1.0% n/a n/a 4 % (a) Long-term medical cost inflation only relates to post-retirement medical plans and its impact on these liabilities. A decrease in each assumption would have a comparable and opposite impact on liabilities. The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period. 4B. Pensions and similar obligations continued Cash flow Group cash flow in respect of pensions and similar post-employment benefits comprises company contributions paid to funded plans and benefits paid by the company in respect of unfunded plans. The table below sets out these amounts: € million € million € million € million 2024 Estimate 2023 2022 2021 Company contributions to funded plans: Defined Benefit (a) 70 291 176 286 Defined Contribution 225 222 212 190 Benefits paid by the Company in respect of unfunded plans: Defined Benefit 110 116 127 108 Group cash flow in respect of pensions and similar benefits 405 629 515 584 (a) The Group contributed a one-off contribution of $110 million into the US Pension Plan in 2023. The Group’s funding policy is to periodically review the contributions made to the plans while taking account of local legislation. 4C. Share-based compensation plans The fair value of awards at grant date is calculated using observable market price. This value is expensed over their vesting period, with a corresponding credit to equity. The expense is reviewed and adjusted to reflect changes to the level of awards expected to vest, except where this arises from a failure to meet a market condition. Any cancellations are recognised immediately in the income statement. As at 31 December 2023, the Group had share-based compensation plans in the form of performance shares and other share awards. The numbers in this note include those for Executive Directors and key management shown in note 4A on page 184 The charge to income statement related to equity-settled share-based compensation plan is €212 million (2022: €177 million; 2021: €161 million). Performance share plans Performance share awards are made in respect of the Performance Share Plan (PSP). Awards for the Global Share Incentive Plan (GSIP) were last made in February 2018 and vested in February 2021. Awards for MCIP were last made in 2020 and will vest in 2024. No further MCIP or GSIP awards will be made. The awards of each plan will vest between 0% and 200% of grant level, subject to the level of satisfaction of performance measures (limits for Executive Directors may vary) . The MCIP allowed Unilever’s managers to invest up to 100% of their annual bonus (a minimum of 33% and maximum of 67% for Executive Directors) in shares in Unilever, and to receive a corresponding award of performance-related shares. From 2021, under the PSP, Unilever’s managers receive annual awards of PLC shares. The performance measures for MCIP are underlying sales growth, underlying EPS growth, underlying return on invested capital, sustainability progress index and for PSP are percentage business winning, free cash flow, underlying return on invested capital and sustainability progress index. MCIP awards made will vest after 4 years, while PSP awards vest after 3 years . A summary of the status of the Performance Share Plans as at 31 December 2023, 2022 and 2021 and changes during the years ended on these dates is presented below: 2023 2022 2021 Number of shares Number of shares Number of shares Outstanding at 1 January 17,923,890 14,318,564 11,371,436 Awarded 7,479,544 10,032,321 7,667,929 Vested (2,021,439) (3,101,598) (3,425,232) Forfeited (2,052,057) (3,325,397) (1,295,569) Outstanding at 31 December 21,329,938 17,923,890 14,318,564 2023 2022 2021 Share award value information Fair value per share award during the year €45.71 €41.56 €47.64 4C. Share-based compensation plans continued Additional information At 31 December 2023, shares in PLC totalling 21,696,344 (2022: 18,842,270) were outstanding in respect of share-based compensation plans of PLC and its subsidiaries, including North American plans. At 31 December 2023, the employee share ownership trust held 1,361,032 (2022: 2,727,097) PLC shares and PLC and its subsidiaries held 36,903 (2022: 327,303) PLC shares which are held as treasury shares. The book value of €207 million (2022: €282 million) of the shares held by the trust and by Unilever PLC and its subsidiaries in respect of share-based compensation plans is eliminated on consolidation by deduction from other reserves. Their market value at 31 December 2023 was €60 million (2022: €144 million). Shares held to satisfy awards are accounted for in accordance with IAS 32 ‘Financial Instruments: Presentation’. All differences between the purchase price of the shares held to satisfy awards granted and the proceeds received for the shares, whether on exercise or lapse, are charged to reserves. |
