DRAVA, KUPA, RJE»INA, LOKVARKA, LI»ANKA LIKA, DOBRA ...

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE HEP GROUP (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
RETIREMENT AND OTHER EMPLOYEE BENEFIT COSTS
The Group has no defined post-retirement benefit plans for its employees or management in Croatia or abroad.
Accordingly, no provision for these costs has been included.
Legal pension and health insurance contributions are paid on behalf of the Group’s employees in the Republic
of Croatia. This obligation applies to all staff hired on the basis of employment contract. The contributions are paid
at a certain percentage determined on the basis of gross salary.
Pension insurance contributions
2010
20%
Health insurance contributions 15%
Employment Fund contribution 1.7%
Occupational injury 0.5%
The Group companies have the obligation to withhold the pension insurance contributions from the employees’
gross salaries.
Contributions on behalf of the employer and the employees are recognised as cost in the period in which
they are incurred (see Note 6).
RETIREMENT BENEFITS AND JUBILEE AWARDS
The Group provides benefits to its employees, which include long-service benefits (jubilee awards) and one-off
retirement benefits. The obligation and the cost of these benefits are determined using the Projected Unit Credit
Method. The Projected Unit Credit Method considers each period of service as giving rise to an additional unit of
benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured
at the present value of estimated future cash flows using a discount rate that is similar to the interest rate on
government bonds where the currency and terms of the Government bonds are consistent with the currency and
estimated terms of the benefit obligation. Calculations of the obligation and cost of these benefits are performed
by a certified actuary.
Jubilee bonuses
The Group provides benefits to its employees for long term work (jubilee bonuses) and severance payments when
retirement. Benefit for long term work amounts from HRK to 1,650 HRK 5,500 net for work in Group from 10 to 40
years continuously.
Severance payments
A Collective Agreement has been in effect since 1 July 2008, under which the employees are entitled to a retirement
benefit to the extent of 1/8 of the average gross monthly salary earned in the period of three months prior to the
retirement for each completed year of continuous employment at the employer. The effective date of the Collective
Agreement was extended until 31 December 2010. A new Collective Agreement was adopted as of 12 January 2011,
effective from 1 January 2011, and is valid until 31 December 2012.
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HEP ANNUAL REPORT 2010
CHAPTER 6 - FINANCIAL STATEMENTS