Retirement employee benefits

12 Months Ended

Dec. 31, 2019

Disclosure Of Retirement Benefits [Abstract]

18.	Retirement employee benefits

Defined contribution plans – Under Mexican legislation, the Company makes payments equivalent to 2% of its workers’ daily comprehensive salary to a defined contribution plan that is part of the retirement savings system. The expense was Ps. 6,001, Ps. 7,162 and Ps. 8,016 in 2017, 2018 and 2019, respectively.

In Jamaica, the Company operates a defined contribution pension plan, which is managed by an independent trust. The Company has no further obligation other than its contribution mandated under the plan. The pension plan is financed primarily by payments from employees and the Company.

Defined benefit plans – According to the Federal Labor Law in Article 162, the Company is required to pay in Mexico a seniority premium as postemployment benefits if an employee leaves and if have at least 15 years of service, which consist of a payment of 12 days per worked year based on the last salary, not to exceed twice the legal minimum wage established by law. The present value of the retirement benefit obligation and the current service cost and past service costs were calculated by independent experts using the projected unit credit method.

The defined benefit plans in Mexico usually expose the Company to actuarial risks such as: interest rate risk, longevity risk and salary risk.

Interest risk		A decrease in the interest rate bond will increase the plan liability.

Longevity risk		The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of the plan participants, during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary risk		The present value of the defined benefit plan liability is calculated by reference to the future salaries of the plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

The amount included in the statement of financial position arising from the obligation of the entity for defined benefit plans on December 31, 2017, 2018 and 2019 is as follows:

		2017					2018					2019
Present value of defined benefit obligations		Ps.		112,980			Ps.		120,606			Ps.		144,743

The table below shows the movements in the present value of defined benefit obligations:

	2017		2018			2019
Opening defined benefit obligation	Ps.	92,575	Ps.	112,980		Ps.	120,606
Plan modifications		—		—			956
Current service cost		9,459		12,775			13,152
Interest cost		8,344		8,907			12,048
Actuarial gains		—		(3,359	)		(115	)
Cost per service passed for modification or reduction		—		(10,858	)		—
New measurement (gains) / losses:
Actuarial losses resulting from changes in financial and demographic assumptions		2,602		161			1,404
Benefits paid		—		—			(3,308	)
Ending defined benefit obligation	Ps.	112,980	Ps.	120,606		Ps.	144,743

Below are the amounts for the years ended December 31, 2017, 2018 and 2019 that were recognized in the consolidated statements of profit or loss and other comprehensive income:

	2017		2018			2019
Current service labor cost	Ps.	9,459	Ps.	12,775		Ps.	13,152
Interest cost		8,344		8,907			12,048
Actuarial gains		—		(3,359	)		(115	)
Cost per service passed for modification or reduction		—		(10,858	)		—
Cost per service for plan modification		—		—			956
Benefits paid		—		—			(3,308	)
Components of defined benefit costs recognized in net income (Note 24)		17,803		7,465			22,735
Measurement of net defined benefit liability:
Actuarial losses arising from changes in financial and demographic assumptions recognized in other comprehensive income		2,602		161			1,404
Total recognized as employee benefit cost	Ps.	20,405	Ps.	7,626		Ps.	24,139

The main actuarial assumptions at the reporting date (expressed as weighted average nominal rates) are shown below:

	2017	2018	2019
Discount of the projected benefit obligation at present value	7.6%	9.2%	7.4%
Salary increase	5.0%	6.0%	6.8%
Remaining labor life	17.7 years	18.6 years	17.6 years
Inflation	4.2%	6.7%	6.0%

The discount rate is determined based on the structure of the interest rate curve of government bonds for 30 years. The net interest cost on the retirement benefit obligation is recorded in profit and loss within the cost of services, in conjunction with the other components of liabilities for retirement benefits.

If the discount rate had a variation of 100 basis points upward or downward, the effect on the liability for retirement benefits would be impacted by Ps. 12,377.

Assumptions related to expected mortality are based on statistics and experience of the Mexican population. The average life expectancy of an individual retiring at age 65 is 17 years for men and 19 years for women (Demographic Mortality Experience for Active people, EMSSA 2009).