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EMPLOYEE BENEFITS

12 Months Ended

Dec. 31, 2023

Disclosure of defined benefit plans [abstract]

NOTE 22 – EMPLOYEE BENEFITS

In accordance with labor legislation in the countries in which Grupo Aval operates, and based on labor conventions and collective bargaining agreements signed between Grupo Aval’s subsidiaries and their employees, employees have short term benefits (including but not limited to salaries, holidays, legal and extralegal premiums, interests on severances and defined contribution plans such as severances), long-term benefits (including but not limited to seniority bonuses), post-employment benefits (including but not limited to medical aids) and retirement benefits (including but not limited to severance payments to employees in Colombia who continue with labor regime before Law 50 of 1990 and legal and extralegal retirement pensions). Compensation of key management personnel (see note 34) includes salaries.

Through personnel benefits plans, Grupo Aval is exposed to several risks (interest rates), which are intended to be minimized by applying the risk management policies and procedures defined under Note 4.

The detail of the balance of liabilities for employee benefits as of December 31, 2023, and 2022 is as follows:


	December 31, 2023		December 31, 2022
Short term	Ps.	385,296	Ps.	425,523
Post-employment		380,207		349,587
Long term		159,329		133,085
Total	Ps.	924,832	Ps.	908,195

Plan Asset	Ps.	(17,024)	Ps.	(18,176)
Net employee benefits	Ps.	907,808	Ps.	890,019

22.1 Post-employment benefits

In Colombia, when employees retire after completing certain thresholds of years and time of service, retirement pensions are assumed by public or private pension funds based on defined contribution plans. Entities and employees contribute monthly defined amounts by law to gain entitlement to a pension at the time of retirement.

Unlike in Central America, in Colombia according to prior labor regimes, post-employment benefits for employees hired before (i) 1968 require pensions to be directly assumed the company for those employees that have fulfilled the requirements of age and years of service and (ii) 1990 entitle employees to receive a compensation equivalent to the last month of salary multiplied by each year of service.

Some subsidiaries have labor conventions or pay extra-legal premiums to employees retiring in compliance with the required age and time of service, when they start enjoying the pension granted by the pension funds.

Some retirees of Grupo Aval and its subsidiaries receive benefits including coverage of medical treatments.

As of December 31, 2023 and 2022, the post-employment benefit expense is composed of:


	December 31, 2023		December 31, 2022
Defined contribution plan	Ps.	108,059	Ps.	101,862
Defined benefit plan		44,426		34,623
Total	Ps.	152,485	Ps.	136,485

22.2 Long Term Employee Benefits

Some Grupo Aval subsidiaries grant their employees extra-legal long-term premiums during their working lives per every five years of service that they complete, calculated as days of salary per year of work.

Grupo Aval has recognized the liabilities corresponding to these benefits, based on the same actuarial calculations and using the same parameters as in retirement benefits.

The following table shows the Post-employment and long-term benefits movements during the years ended on December 31, 2023, 2022 and 2021 are as follows:


	Post-employment benefits						Long-term benefits
	December		December		December		December		December		December
	31, 2023		31, 2022		31, 2021		31, 2023		31, 2022		31, 2021
Balance at the beginning of the year	Ps.	349,587	Ps.	522,196	Ps.	597,936	Ps.	133,085	Ps.	134,831	Ps.	180,090
Service costs		2,690		3,845		2,749		14,765		14,815		18,454
Interests cost		41,736		30,778		30,705		16,699		8,949		7,982
Gain on settlements		—		—		278		—		—		—
Past Service Costs ⁽¹⁾		(2,079)		—		—		10,063		—		(28,009)
	Ps.	391,934	Ps.	556,819	Ps.	631,668	Ps.	174,612	Ps.	158,595	Ps.	178,517
Changes in actuarial assumptions from changes in demographic assumptions		(753)		—		(15)		(7,342)		—		(86)
Changes in actuarial assumptions from changes in financial assumptions		26,832		(69,967)		(54,996)		473		(14,149)		(19,976)
Changes in actuarial assumptions from changes in the experience		27,472		2,167		(21,264)		17,313		10,456		(2,893)
	Ps.	53,551	Ps.	(67,800)	Ps.	(76,275)	Ps.	10,444	Ps.	(3,693)	Ps.	(22,955)
Payments to employees		(61,589)		(51,306)		(51,591)		(25,727)		(21,817)		(20,731)
Liquidation of entities		—		(432)		—		—		—		—
Reclassification BAC ⁽²⁾⁽³⁾		—		—		(1,002)		—		—		—
Loss of control in subsidiary ⁽²⁾		—		(98,024)		—		—		—		—
Discontinued operations ⁽²⁾		—		6,251		15,125		—		—		—
Effect of movements in exchange rates		(3,689)		4,079		4,271		—		—		—
Liability balance at the end of the year	Ps.	380,207	Ps.	349,587	Ps.	522,196	Ps.	159,329	Ps.	133,085	Ps.	134,831

Plan Assets
Balance at the beginning of the year plan assets	Ps.	(18,176)	Ps.	(46,840)	Ps.	(38,241)	Ps.	—	Ps.	—	Ps.	—
Interests income		(794)		(427)		(522)		—		—		—
Remeasurements on plan assets		(1,788)		5,885		(1,676)		—		—		—
Reclassification BAC ⁽²⁾⁽³⁾		—		—		(3,189)		—		—		—
Loss of control in subsidiary ⁽²⁾		—		27,269		—		—		—		—
Discontinued operations ⁽²⁾		—		—		(798)		—		—		—
Effect of movements in exchange rates		3,734		(4,063)		(2,414)		—		—		—
Balance at the end of the year plan assets	Ps.	(17,024)	Ps.	(18,176)	Ps.	(46,840)	Ps.	—	Ps.	—	Ps.	—
Net Balance at the end of the year	Ps.	363,183	Ps.	331,411	Ps.	475,356	Ps.	159,329	Ps.	133,085	Ps.	134,831

(1)

For 2023, in post-employment, the variation includes of a change in the institutional retirement bonus plan for Banco de Occidente and in the long term includes the update of the convention for in a long-term institutional benefit plan at Banco de Bogotá. For 2021, includes the effect of a change in a long-term institutional benefit plan at Banco de Occidente and Fiduciaria de Occidente.

(2)	See note 1.1., "Discontinued operation of BAC Holding".

(3)	Correspond to reclassification for comparability of the movements of BAC Holding consider the deconsolidation of this entity during year 2022.

The assumptions used to calculate the obligation projected for different post-employment benefits employees are as follows:


	December 31,		December 31,
Post-employment benefits *	2023		2022
Discount interest rate	11.34	%	13.27	%
Inflation rate	2.96	%	3.00	%
Salary growth rate	3.80	%	3.58	%
Pension growth rate	3.00	%	3.00	%

^{* Entities in Colombia and subsidiaries abroad participate.}


	December 31,		December 31,
Long-term benefits *	2023		2022
Discount interest rate	11.40	%	13.72	%
Inflation rate	3.00	%	3.00	%
Salary growth rate	4.27	%	4.00	%

^{* Only entities from Colombia participate.}

Employee turnover is calculated based on the experience of each entity. For those entities where a sufficiently long statistic history is not yet available to support the actuarial bases, the SoA2003 table is used as a reference. With this table, the probability of permanence of personnel in the entity is established, modified according to the population factor of each benefit. Employee´s life expectancy is calculated based on the mortality tables RV08 (Colombia) and GA83 (Central America).

The sensitivity analysis for post-employment and long-term benefits liabilities due to defined benefits plans to different actuarial and financial variables is shown below, maintaining other variables at constant values (increase or decrease 50 basis points):

-0.50 basic points

+0.50 basic points

At December 31, 2023

Post-employment
benefits

Long-term
benefits

Post-employment
benefits

Long-term
benefits

Discount interest rate

Ps.

10,764

Ps.

3,050

Ps.

(10,227)

Ps.

(2,919)

Salaries growth rate

(1,756)

(3,819)

2,353

3,589

Retirement growth rate

(10,443)

N/A

10,979

N/A

-0.50 basic points

+0.50 basic points

At December 31, 2022

Post-employment
benefits

Long-term
benefits

Post-employment
benefits

Long-term
benefits

Discount interest rate

Ps.

8,242

Ps.

2,414

Ps.

(7,920)

Ps.

(2,317)

Salaries growth rate

(1,621)

(2,991)

1,671

3,101

Retirement growth rate

(7,191)

N/A

3,589

N/A

The following table reveals he cash flows required for payment of post–employment and long-term benefits:


		Payments for post-		Payments for long-
Year		employment		term benefits
2024	Ps.	57,922	Ps.	31,798
2025		58,572		27,668
2026		57,227		22,014
2027		54,944		22,121
2028		53,979		19,934
Years 2029 – 2033		243,179		79,389
Total	Ps.	525,823	Ps.	202,924

As of December 31, 2023, the average duration of post-employment benefit plans is 5.52 years (4.62 years for 2022) and for the long-term it is 3.75 years (3.56 years for 2022).