ManpowerGroup 2014 Annual Report Download - page 44

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Defined Benefit Pension Plans
We sponsor several qualified and nonqualified pension plans covering permanent employees. The most significant plans
are located in the United Kingdom, the United States, the Netherlands, France and Norway. Annual expense relating to
these plans is recorded in selling and administrative expenses and is estimated to be approximately $12.5 million in 2015,
compared to $12.6 million, $11.8 million and $12.6 million in 2014, 2013 and 2012, respectively. Included in the 2013
expense was a $2.3 million curtailment gain resulting from an amendment to a defined benefit plan in the Netherlands.
Effective January 1, 2013, the Netherlands’ defined benefit plan was frozen, and the participants were transitioned to a
defined contribution plan.
The calculations of annual pension expense and the pension liability required at year-end include various actuarial
assumptions such as discount rates, expected rate of return on plan assets, compensation increases and employee
turnover rates. We review the actuarial assumptions on an annual basis and make modifications to the assumptions as
necessary. We review market data and historical rates, on a country-by-country basis, to check for reasonableness in
setting both the discount rate and the expected return on plan assets. We determine the discount rate based on an index
of high-quality corporate bond yields and matched-funding yield curve analysis as of the end of each fiscal year. The
expected return on plan assets is determined based on the expected returns of the various investment asset classes held
in the plans. We estimate compensation increases and employee turnover rates for each plan based on the historical rates
and the expected future rates for each respective country. Changes to any of these assumptions will impact the level of
annual expense recorded related to the plans.
We used a weighted-average discount rate of 3.9% for the United States plans and 2.9% for non-United States plans in
determining the estimated pension expense for 2015. These rates compare to the weighted-average discount rate of 4.6%
for the United States plans and 4.1% for non-United States plans we used in determining the estimated pension expense for
2014, and reflect the current interest rate environment. Absent any other changes, a 25 basis point increase and decrease
in the weighted-average discount rate would impact 2015 consolidated pension expense by approximately $0.1 million and
$1.0 million for the United States plans and non-United States plans, respectively. We have selected a weighted-average
expected return on plan assets of 5.5% for the United States plans and 3.2% for the non-United States plans in determining
the estimated pension expense for 2015. The comparable rates used for the calculation of the 2014 pension expense were
6.0% and 4.5% for the United States plans and non-United States plans, respectively. A 25 basis point change in the
weighted-average expected return on plan assets would impact 2015 consolidated pension expense by approximately $0.1
million for the United States plans and $0.9 million for the non-United States plans. Changes to these assumptions have
historically not been significant in any jurisdiction for any reporting period, and no significant adjustments to the amounts
recorded have been required in the past or are expected in the future. (See Note 8 to the Consolidated Financial Statements
for further information.)
United States Workers’ Compensation
In the United States, we are under a self-insured retention program in most states covering workers’ compensation claims
for our contingent workers. We determine the proper reserve balance using an actuarial valuation, which considers our
historical payment experience and current employee demographics. Our reserve for such claims as of December 31, 2014
and 2013 was $79.8 million and $75.3 million, respectively. Workers’ compensation expense is recorded as a component
of cost of services.
There are two main factors that impact workers’ compensation expense: the number of claims and the cost per claim.
The number of claims is driven by the volume of hours worked, the business mix which reflects the type of work performed
(for example, office and professional work has fewer claims than industrial work), and the safety of the environment where
Management’s Discussion & Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations