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 Rupee Symbolcrore

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 Rupee Symbolcrore

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 Rupee Symbolcrore

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 Rupee Symbol37 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 Rupee Symbol22 crore and Rupee Symbol26 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 Rupee Symbol36 crore and Rupee Symbol26 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 Rupee Symbol106 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 Rupee Symbol109 crore and Rupee Symbol91 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 Rupee Symbolcrore

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 Rupee Symbol198 crore and Rupee Symbol171 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 Rupee Symbolcrore

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 Rupee Symbolcrore

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 Rupee Symbolcrore

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