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Employee benefits, restructuring and post-retirement employee benefits provisions

12 Months Ended

Jun. 30, 2023

Employee benefits, restructuring and post-retirement employee benefits provisions

27 Employee benefits, restructuring and post-retirement employee benefits provisions


	2023		2022
	US$M		US$M
Employee benefits 1		1,749		1,351
Restructuring 2		28		27
Post-retirement employee benefits 3		373		281

Total provisions		2,150		1,659

Comprising:
Current		1,734		1,319
Non-current		416		340


2023	Employee benefits			Restructuring			Post- retirement employee benefits 3			Total
	US$M			US$M			US$M			US$M
At the beginning of the financial year		1,351			27			281			1,659
Acquisition of subsidiaries and operations 4		25			–			–			25
Charge/(credit) for the year:
Underlying		1,675			26			75			1,776
Discounting		–			–			19			19
Net interest expense		–			–			(5	)		(5	)
Exchange variations		(21	)		–			34			13
Released during the year		(66	)		–			(2	)		(68	)
Remeasurement gains taken to retained earnings		–			–			18			18
Utilisation		(1,204	)		(25	)		(47	)		(1,276	)
Transfers and other movements		(11	)		–			–			(11	)

At the end of the financial year		1,749			28			373			2,150

1	The expenditure associated with total employee benefits will occur in a pattern consistent with when employees choose to exercise their entitlement to benefits.

2	Total restructuring provisions include provisions for terminations and office closures.

The net liability recognised in the Consolidated Balance Sheet includes US$151 million present value of funded defined benefits pension obligation (2022: US$165 million) offset by fair value of defined benefit scheme assets US$(159

) million (2022: US$(169) million), US$79 million present value of unfunded defined pension and post-retirement medical benefits obligation (2022: US$85 million) and US$302 million unfunded post-employment benefits obligation in Chile (2022: US$200 million).

4	Relates to the acquisition of OZL on 2 May 2023. Refer to note 29 ‘Business combinations’ for more information.

Recognition and measurement

Provisions are recognised by the Group when:

•

there is a present legal or constructive obligation as a result of past ev

nts

•

it is more likely than not that a permanent outflow of resources will be required to settle the obligation

•

the amount can be reliably estimated and measured at the present value of management’s best estimate of the cash outflow required to settle the obligation at the reporting date


Provision		Description
Employee benefits		Liabilities for benefits accruing to employees up until the reporting date in respect of wages and salaries, annual leave and any accumulating sick leave are recognised in the period the related service is rendered. Liabilities recognised in respect of short-term employee benefits expected to be settled within 12 months are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for other long-term employee benefits, including long service leave, are measured as the present value of estimated future payments for the services provided by employees up to the reporting date. Liabilities that are not expected to be settled within 12 months are discounted at the reporting date using market yields of high-quality corporate bonds or government bonds for countries where there is no deep market for corporate bonds. The rates used reflect the terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. In relation to industry-based long service leave funds, the Group’s liability, including obligations for funding shortfalls, is determined after deducting the fair value of dedicated assets of such funds. Liabilities for short and long-term employee benefits (other than unpaid wages and salaries) are disclosed within employee benefits. Other liabilities for unpaid wages and salaries related to the current period are recognised in other creditors. Review of employee allowances and entitlements On 1 June 2023, the Group disclosed the identification of two issues with certain allowances and entitlements affecting a number of current and former employees in Australia. The identified issues relate to rostered employees having leave incorrectly deducted on public holidays since 2010 (Leave issue) and certain employees at Port Hedland being entitled to additional allowances due to an error with the employment entity in their contract (Port Hedland issue). The Group self-reported the issues to the Fair Work Ombudsman in Australia. The Group has applied extensive resources to the review and analysis of its records, with a dedicated team established to investigate and remediate the issues. Since the date of the announcement, the Group has progressed its analysis and has commenced contacting impacted employees. The Group has commenced paying additional allowances to those current employees impacted by the Port Hedland issue. The Group has also corrected the leave balances of current employees impacted by the Leave Issue. The Group’s current best estimate of the cost of remediating the two issues, recognised in employee benefit provisions at 30 June 2023, is US$265 million, incorporating on-costs including associated superannuation and interest payments. The calculation of this provision involved a substantial volume of data and a significant degree of complexity with further detailed modelling and validation required to determine the final cost of remediation. As such, uncertainty remains in the amount and timing of final remediation costs, with the outcomes also subject to continuing engagement with regulatory authorities, including the Fair Work Ombudsman. A further US$15 million of other related costs were recognised in the year ended 30 June 2023, which do not form part of the employee benefit provision. As the Group has applied judgement in determining the provision for 30 June 2023, there is a risk that the provision may be adjusted in future reporting periods as the remediation process continues. The Group has also engaged a global assurance firm to conduct a thorough review of the Group’s payroll systems. As this review is ongoing there is a risk that other instances of non-compliance requiring remediation may be identified and, as such, that associated provisions may be recognised in future reporting periods.

Restructuring		Restructuring provisions are recognised when: • the Group has developed a detailed formal plan identifying the business or part of the business concerned, the location and approximate number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline • the restructuring has either commenced or been publicly announced and can no longer be withdrawn Payments that are not expected to be settled within 12 months of the reporting date are measured at the present value of the estimated future cash payments expected to be made by the Group.

Post-retirement employee benefits		Defined contribution pension schemes and multi-employer pension schemes For defined contribution schemes or schemes operated on an industry-wide basis where it is not possible to identify assets attributable to the participation by the Group’s employees, the pension charge is calculated on the basis of contributions payable. The Group contributed US$358 million during the financial year (2022: US$324 million; 2021: US$301 million) to defined contribution plans and multi-employer defined contribution plans. These contributions are expensed as incurred.


Provision		Description
		Defined benefit pension and post-retirement medical schemes The Group operates or participates in a number of defined benefit pension schemes throughout the world, all of which are closed to new entrants. The funding of the schemes complies with local regulations. The assets of the schemes are generally held separately from those of the Group and are administered by trustees or management boards. The Group also operates a number of unfunded post-retirement medical schemes in the United States, Canada and Europe. For defined benefit schemes, an asset or liability is recognised in the balance sheet based at the present value of defined benefit obligations less, where funded, the fair value of plan assets, except that any such asset cannot exceed the present value of expected refunds from and reductions in future contributions to the plan. Full actuarial valuations are prepared by local actuaries for all schemes, using discount rates based on market yields at the reporting date on high-quality corporate bonds or by reference to national government bonds if high-quality corporate bonds are not available. Where funded, scheme assets are invested in a diversified range of asset classes, predominantly comprising bonds and equities.