Nokia 2006 Annual Report Download - page 161

Notes to the Consolidated Financial Statements (Continued)
4. Personnel expenses
2006 2005 2004
EURm EURm EURm
Wages and salaries ************************************************ 3 457 3 127 2 805
Sharebased compensation expense, total***************************** 192 104 62
Pension expenses, net ********************************************** 310 252 253
Other social expenses ********************************************** 439 394 372
Personnel expenses as per profit and loss account ********************* 4 398 3 877 3 492
Sharebased compensation expense includes pension and other social costs of EUR 4 million
(EUR 9 million in 2005 and EUR 2 million in 2004) based upon the related employee charge
recognized during the year. In 2006, the benefit was due to a change in the treatment of pension
and other social costs.
The net of tax sharebased compensation expense amounted to EUR 141 million in 2006
(EUR 82 million in 2005 and EUR 60 million in 2004).
Pension expenses, comprised of multiemployer, insured and defined contribution plans were
EUR 198 million in 2006 (EUR 206 million in 2005 and EUR 192 million in 2004).
2006 2005 2004
Average personnel
Mobile Phones ************************************************** 3 639 2 647 2 853
Multimedia ***************************************************** 3 058 2 750 2 851
Enterprise Solutions ********************************************* 2 264 2 185 2 167
Networks******************************************************* 20 277 17 676 15 463
Common Group Functions **************************************** 36 086 31 638 30 177
Nokia Group **************************************************** 65 324 56 896 53 511
5. Pensions
The most significant pension plans are in Finland and are comprised of the Finnish state TEL system
with benefits directly linked to employee earnings. These benefits are financed in two distinct
portions. The majority of benefits are financed by contributions to a central pool with the majority of
the contributions being used to pay current benefits. The other part comprises reserved benefits which
are prefunded through the trusteeadministered Nokia Pension Foundation. The pooled portion of the
TEL system is accounted for as a defined contribution plan and the reserved portion as a defined
benefit plan. The foreign plans include both defined contribution and defined benefit plans.
Effective on January 1, 2005, the Finnish TEL system was reformed. The most significant change that
has an impact on the Group’s future financial statements is that pensions accumulated after 2005
are calculated on the earnings during the entire working career, not only on the basis of the last
few years of employment as provided by the old rules. An increase to the rate at which pensions
accrue led to a past service cost of EUR 5 million in 2004, which will be recognized over employees’
future average working life.
As a result of the changes in the TEL system, which increased the Group’s obligation in respect of ex
employees, and reduced the obligation in respect of recent recruits, a change in the liability has
been recognised to cover future disability pensions. In 2005, to compensate the Group for the
additional liability in respect of exemployees assets of EUR 24 million were transferred from the
pooled part of the pension system to cover future disability pensions inside Nokia Pension
Foundation. As this transfer of assets is effectively a reduction of the obligation to the pooled
premium, it has been accounted for as a credit to the profit and loss account during 2005.
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