24 Employee benefits

The Employee benefit liabilities of €569 million (2022: €292 million) consist of €388 million related to pensions (2022: €247 million), €58 million related to other post-employment benefits (2022: €16 million) and €123 million related to other employee benefits (2022: €29 million). See also the table below.

The Group operates a number of defined benefit plans and defined contribution plans throughout the world, the assets of which are generally held in separately administered funds. The pension plans are generally funded by payments from employees and from the relevant group companies. The Group also provides certain additional healthcare benefits to retired employees in the US and Switzerland.

Post-employment benefits are employee benefits (other than termination benefits and short-term employee benefits) that are payable after the completion of employment. Post-employment benefit accounting is intended to reflect the recognition of post-employment benefits over the employee’s approximate service period, based on the terms of the plans and the investment and funding.

The charges for post-employment benefit costs recognized in the income statement (Note 5 Net sales and costs) relate to the following.

For 2024, costs for the defined benefit plans relating to pensions are expected to be €86 million (2023: €40 million).

Changes in net liabilities of the post-employment benefits recognized in the balance sheet are shown in the following overview.

The fair value of the plan assets consists of 78% of quoted assets (2022: 94%).

The pension-plan assets include neither ordinary dsm-firmenich shares nor property occupied by dsm-firmenich. In 2024, dsm-firmenich is expected to contribute €79 million (actual 2023: €67 million) to its defined benefit plans in the core countries.

The countries with the most significant defined benefit obligations for dsm-firmenich are specified in the following table.

The main actuarial assumptions for the year (weighted averages) are:

The above mentioned actuarial assumptions are harmonized for all defined benefit plans in a country.

Sensitivities of significant actuarial assumptions

The discount rate, the future increase in wages and salaries and the pension increase rate were identified as significant actuarial assumptions. The following impacts on the defined benefit obligation are to be expected.

• A 0.25% increase/decrease in the discount rate would lead to a decrease/increase of 2.9% (2022: 2.5%) in the defined benefit obligation
• A 0.25% increase/decrease in the expected increase in salaries/wages would lead to an increase/decrease of 0.3% (2022: 0.3%) in the defined benefit obligation
• A 0.25% increase/decrease in the expected rate of pension increase would lead to an increase/decrease of less than 1.6% (2022: 0.6%) in the defined benefit obligation

The sensitivity analysis is based on realistically possible changes as at the end of the reporting year. Each change in a significant actuarial assumption was analyzed separately as part of the test. Interdependencies were not taken into account.

Main defined benefit plans description

The dsm-firmenich Group companies have various pension plans, which are geared to the local regulations and practices in the countries in which they operate. As these plans are designed to comply with the statutory framework, tax legislation, local customs, and economic situation of the countries concerned, it follows that the nature of the plans varies from country to country. The plans are based on local legal and contractual obligations.

dsm-firmenich’s current policy is to offer defined contribution retirement benefit plans to new employees wherever possible. However, dsm-firmenich still has a (small) number of defined benefit pension and healthcare schemes from the past or in countries where legislation does not allow us to offer a defined contribution scheme. Generally, these schemes have been funded through external trusts or foundations, where dsm-firmenich faces the potential risk of funding shortfalls. The most significant defined benefit schemes are:

• DSM Nutritional Products (DNP) AG Pension Plan in Switzerland (DNP AG)
• Pension Plan at Firmenich SA in Switzerland
• DSM UK Pension Scheme in the UK
• Consolidated Pension Plan of DSM North America, Inc. in the US
• Pension plan at Firmenich, Inc. in the US
• Pension Plan at DSM Nutritional Products GmbH in Germany (DNP GmbH)

For each plan, the following characteristics are relevant:

DNP AG Pension Plan in Switzerland

The DNP AG Pension Plan is a typical Swiss Cash Balance plan. For accounting purposes, this plan is qualified as a defined benefit plan. It is a contribution-based plan, with no promise of indexation for on-going pensions. The Swiss state minimal requirements for occupational benefit plans have however to be respected.

The purpose of the plan is to protect the (legacy) DSM employees against the economic consequences of retirement, disability and death. The employer and employees pay contributions to the pension plan at rates set out in the pension plans rules based on a percentage of salary. The amount of the retirement account can be taken by the employee at retirement in the form of pension or capital.

The weighted average duration of the defined benefit obligation is 10.8 years (2022: 10.0 years) which could be seen as an indication of the maturity profile of the scheme.

According to the Swiss Federal Law on Occupational Retirement, Survivors and Disability (LPP/BVG), the Swiss Pension plans are managed by independent and legally autonomous entities which have the legal structure of foundation. The Pension Boards are composed of equal numbers of employee and employer representatives. Each year, the Pension Boards decide the level of interest, if any, to apply to the retirement accounts in accordance with the pension policy.

It is also responsible for the investment of the assets and defining the investment strategy for long-term returns with an acceptable level of risk. The plan assets are collectively invested (no individual investment choice).

Firmenich SA Pension Plan in Switzerland

The Firmenich SA Pension Plan is a typical Swiss Cash Balance plan. For accounting purposes, this plan is qualified as a defined benefit plan. It is a contribution-based plan, with no promise of indexation for on-going pensions. The Swiss state minimal requirements for occupational benefit plans have however to be respected.

The purpose of the plan is to protect the (legacy) Firmenich employees against the economic consequences of retirement, disability and death. The employer and employees pay contributions to the pension plan at rates set out in the pension plans rules based on a percentage of salary. The amount of the retirement account can be taken by the employee at retirement in the form of pension or capital.

The weighted average duration of the defined benefit obligation is 14.3 years which could be seen as an indication of the maturity profile of the scheme.

According to the Swiss Federal Law on Occupational Retirement, Survivors and Disability (LPP/BVG), the Swiss Pension plans are managed by independent and legally autonomous entities which have the legal structure of foundation. The Pension Boards are composed of equal numbers of employee and employer representatives. Each year, the Pension Boards decide the level of interest, if any, to apply to the retirement accounts in accordance with the pension policy. It is also responsible for the investment of the assets and defining the investment strategy for long-term returns with an acceptable level of risk. The plan assets are collectively invested (no individual investment choice).

DSM UK Pension Scheme

The DSM UK Pension Scheme was closed as of 30 September 2016 for all pension accruals. An unconditional indexation policy is applicable for the vested pension rights.

The weighted average duration of the defined benefit obligation is 13.9 years (2022: 14.3 years), which could be seen as an indication of the maturity profile of the scheme.

The pension plan is managed and controlled by a dsm-firmenich company pension fund. The Board of Trustees consists of representatives of the employer and the employees who have an independent role. Till last year, there were two company guarantees in place: (1) a guarantee from DNP AG (capped at GBP 14 million) related to the 2012 valuation, and (2) a guarantee from Royal DSM (capped at GBP 11 million) related to arrangements with respect to former UK divestments. Both guarantees were surrendered by a one-time payment of the company.

There is a long-term de-risking strategy for the DSM UK Pension Scheme in place with the objective to align the company’s intentions and the Trustees responsibility with respect to this plan.

Consolidated Plan of DSM North America, Inc. in the US

The Consolidated Plan in the US has been closed to new entrants since 2014. As of 31 December 2016, the plan was closed for pension accrual of the non-unionized employees, and as a result of the DRF divestment in 2021, it was fully frozen for all unionized employees as well. In December 2023, all pension liabilities within the plan were fully settled with an insurance company.

As a result of the settlement, the weighted average duration of the defined obligations is 0.0 years (2022: 9.7 years).

The pension plan was managed and controlled by a DSM company pension fund. The pension fund will finalize the last formalities and will finally be liquidated.

Pension plan at Firmenich, Inc. in the US

The plan provides benefits on a defined benefit basis, and is closed to all new employees. The plan was also frozen to the majority of current employees for future benefit accruals. The grandfathered Group of participants to the defined benefit plan continue to accrue benefits which are payable at retirement and on death in service. With exceptions for optional lump sum amounts for certain sections of the plan, the benefits are paid out as annuities.

The US pension plan is qualified under and is managed in accordance with the requirements of US federal law. In accordance with federal law the assets of the plan are legally separate from the employer and are held in a pension trust. The law requires minimum and maximum amounts that can be contributed to the trust, together with limitations on the amount of benefits that may be provided under the plan. There are named fiduciaries that are responsible for ensuring the plan is managed in accordance with the law. The fiduciaries are responsible for defining the investment strategy for long-term returns with an acceptable level of risk as well as the oversight of the investment of plan assets. The employees do not contribute to the plan and the employer contributes to the plan amounts which are at least equal to the minimum required by the law and not more than the maximum that would limit the tax deductibility of the contributions.

The weighted average duration of the defined benefit obligation is 9.6 years which could be seen as an indication of the maturity profile of the scheme.

DNP GmbH Pension Plan in Germany

The DNP GmbH Pension Plan in Germany has been closed to new entrants as of 31 December 2008. The accrual is still applicable for employees who have been participating in the plan since 2008. The pension plan is a final-pay pension plan (averaged over the last 12 months prior to retirement) and service-related benefit.

The liability is on the balance sheet of DSM Nutritional Products GmbH. No assets are allocated to this liability. All reimbursements will be paid out by the local company.

The weighted average duration of the defined benefit obligation is 12.0 years (2022: 12.9 years), which could be seen as an indication of the maturity profile of the scheme.

Other employee benefits

Other employee benefits comprise jubilees, long-term incentive (LTI) plans to senior management and deferred compensation liabilities. The changes in other employee benefits are listed below.