Notes to the consolidated financial statements
2.12 Employee benefits
2.12.1 Gratuity
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Company’s financial statements as of March 31, 2011, March 31, 2010, March 31, 2009 and March 31, 2008 :
in 
crore
As of March 31, |
||||
2011 |
2010 |
2009 |
2008 |
|
Change in benefit obligations |
||||
Benefit obligations at the beginning |
325 |
267 |
224 |
225 |
Service cost |
178 |
80 |
51 |
50 |
Interest cost |
25 |
19 |
16 |
17 |
Actuarial (gains) / losses |
17 |
(5) |
1 |
(8) |
Benefits paid |
(65) |
(36) |
(25) |
(23) |
Amendment in benefit plan |
– |
– |
– |
(37) |
Benefit obligations at the end |
480 |
325 |
267 |
224 |
Change in plan assets |
||||
Fair value of plan assets at the beginning |
327 |
268 |
236 |
225 |
Expected return on plan assets |
36 |
25 |
17 |
18 |
Actuarial gains |
– |
1 |
5 |
2 |
Employer contributions |
182 |
69 |
35 |
14 |
Benefits paid |
(65) |
(36) |
(25) |
(23) |
Fair value of plan assets at the end |
480 |
327 |
268 |
236 |
Funded status |
– |
2 |
1 |
12 |
Prepaid gratuity benefit |
2 |
4 |
1 |
12 |
Accrued gratuity |
(2) |
(2) |
– |
– |
Net gratuity cost for the years ended March 31, 2011 and March 31, 2010 comprises the following components :
in crore
Year ended March 31, |
||
2011 |
2010 |
|
Service cost |
178 |
80 |
Interest cost |
25 |
19 |
Expected return on plan assets |
(36) |
(25) |
Actuarial (gains) / Losses |
17 |
(6) |
Plan amendments |
(4) |
(3) |
Net gratuity cost |
180 |
65 |
The net gratuity costs have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows :
in crore
Year ended March 31, |
||
2011 |
2010 |
|
Cost of sales |
157 |
57 |
Selling and marketing expenses |
15 |
5 |
Administrative expenses |
8 |
3 |
180 |
65 |
|
Effective July 1, 2007, the Company amended its Gratuity Plan, to suspend the voluntary defined death benefit component of the Gratuity Plan. This amendment resulted in a negative past service cost amounting to 37 crore, which is being amortized on a straight-line basis over the average remaining service period of employees which is 10 years. The unamortized negative past service cost of 22 crore and 26 crore as of March 31, 2011 and March 31, 2010, respectively, has been included under other current liabilities.
The weighted-average assumptions used to determine benefit obligations as of March 31, 2011, March 31, 2010, March 31, 2009 and March 31, 2008 are as follows :
As of March 31, |
||||
2011 |
2010 |
2009 |
2008 |
|
Discount rate |
8.0% |
7.8% |
7.0% |
7.9% |
Weighted average rate of increase in compensation levels |
7.3% |
7.3% |
5.1% |
5.1% |
The weighted-average assumptions used to determine net periodic benefit cost for the year ended March 31, 2011 and March 31, 2010 are as follows :
Year ended March 31, |
||
2011 |
2010 |
|
Discount rate |
7.8% |
7.0% |
Weighted average rate of increase in compensation levels |
7.3% |
7.3% |
Rate of return on plan assets |
9.4% |
9.0% |
The Company contributes all ascertained liabilities towards gratuity to the Infosys Technologies Limited Employees’ Gratuity Fund Trust. In case of Infosys BPO, contributions are made to the Infosys BPO Employees’ Gratuity Fund Trust. Trustees administer contributions made to the trust and contributions are invested in specific designated instruments as permitted by Indian law and investments are also made in mutual funds that invest in the specific designated instruments. As of March 31, 2011 and March 31, 2010 the plan assets have been primarily invested in government securities.
Actual return on assets for the year ended March 31, 2011 and March 31, 2010 was 36 crore and 26 crore, respectively.
The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards. The Company’s overall expected long-term rate-of-return on assets has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. Historical returns during the year ended March 31, 2011 and March 31, 2010 have not been lower than the expected rate of return on plan assets estimated for those years. The discount rate is based on the government securities yield. The Company expects to contribute approximately 106 crore to the gratuity trusts during fiscal 2012.
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.
2.12.2 Superannuation
The Company contributed 109 crore and 91 crore to the superannuation plan during the year ended March 31, 2011 and March 31, 2010, respectively.
Superannuation contributions have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows :
in crore
Year ended March 31, |
||
2011 |
2010 |
|
Cost of sales |
95 |
80 |
Selling and marketing expenses |
9 |
7 |
Administrative expenses |
5 |
4 |
109 |
91 |
|
2.12.3 Provident fund
The Company has an obligation to fund any shortfall on the yield of the trust’s investments over the administered interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and in most cases the actual return earned by the Company has been higher in the past years. In the absence of reliable measures for future administered rates and due to the lack of measurement guidance, the Company’s actuary has expressed its inability to determine the actuarial valuation for such provident fund liabilities. Accordingly, the Company is unable to exhibit the related information.
The Company contributed 198 crore and 171 crore to the provident fund during the year ended March 31, 2011 and March 31, 2010, respectively.
Provident fund contributions have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows :
in crore
Year ended March 31, |
||
2011 |
2010 |
|
Cost of sales |
173 |
150 |
Selling and marketing expenses |
16 |
13 |
Administrative expenses |
9 |
8 |
198 |
171 |
|
2.12.4 Employee benefit costs include :
in crore
Year ended March 31, |
||
2011 |
2010 |
|
Salaries and bonus |
14,369 |
11,765 |
Defined contribution plans |
128 |
112 |
Defined benefit plans |
359 |
215 |
Share based compensation |
– |
1 |
14,856 |
12,093 |
|
The employee benefit cost is recognized in the following line items in the statement of comprehensive income :
in crore
Year ended March 31, |
||
2011 |
2010 |
|
Cost of sales |
12,971 |
10,617 |
Selling and marketing expenses |
1,218 |
935 |
Administrative expenses |
667 |
541 |
14,856 |
12,093 |
|