This excerpt taken from the PBR 20-F filed Jun 30, 2005.
We had 52,037 employees on December 31, 2004, compared to 48,798 employees on December 31, 2003 and 46,723 on December 31, 2002. The increase in the number of our employees in 2004 is primarily a result of the implementation of a hiring policy designed to meet our demand for more employees. This increased demand has resulted from the growth of our business and our desire to reduce the number of outsourced personnel. Expenses relating to employees of the parent company amounted to approximately R$4,374 million (U.S.$1,495 million) in 2004, R$3,612 million (U.S.$1,175 million) in 2003 and R$3,019 million (U.S.$1,033 million) in 2002. During 2004, these expenses represented 70% of our consolidated employee expenses.
Of the 52,037 employees of Petrobras on December 31, 2004, the parent company employed 39,091. Of these 39,091 employees, 27,404 occupied mid-level positions related to operations and administrative support, and 10,749 worked as upper-level employees in engineering and administration. The remaining 938 employees of the parent company were maritime employees. 67% of the parent companys workforce was located in the Southeast region of Brazil, 27% was located in the Northeast region, and the remaining 6% was elsewhere.
We negotiate annually collective bargaining agreements with the Oil Workers Unified Federation, the union to which our onshore employees are affiliated, and the Maritime Employees Union, the union to which our maritime employees are affiliated. The current collective bargaining agreement with the Oil Workers Unified Federation was signed on November 29, 2004, and is retroactive to September 1, 2004. This collective bargaining agreement will expire on August 31, 2005. The current collective bargaining agreement with the maritime employees union was signed on April 11, 2005, and is retroactive to November 1, 2004. This collective bargaining agreement will expire on October 31, 2005.
We consider our relations with our employees and with the Oil Workers Unified Federation and maritime employees union to be satisfactory.
Under the terms of the new collective bargaining agreements for our onshore and maritime employees, we agreed, among other things, to increase the salary of oil workers by 7.81% and grant a single level pay scale raise to all employees, effective retroactively to September and November 2004, respectively.
A labor strike has not caused a material decrease in production since 1995, when our oil workers held a 30-day strike to protest the amendment to the Brazilian constitution under which we ceased to be the Brazilian governments exclusive agent in the Brazilian hydrocarbon industry. The strike caused a significant decrease in our production and refining output and led to a substantial increase in the level of our imports. Since then, the most significant strike occurred in 2001, when our oil workers were on strike for five days. During 2004, there were work disturbances during the period of negotiation of the new collective bargaining agreements, which included partial work stoppages lasting 24 hours and delays to initiate the working day. Such disturbances did not have a negative effect on our results.
We spent approximately R$274.7 million (U.S.$93.9 million) on employee training in 2004 at our training centers, as compared to R$275.1 million (U.S.$89.5 million) in 2003.
With the enactment of the Oil Law and the emergence of competitors in the Brazilian oil sector, we have developed a strategic plan to provide incentives to attract new employees and to retain existing ones. We have also implemented a management improvement plan, which will focus on training our management-level employees to enable them to develop the skills necessary to operate in a free-market economy. As part of our employee incentives, we have merit-based promotions and, as permitted by Brazilian law, a profit sharing plan with predetermined criteria. Pursuant to this plan, the amount of the profit sharing is determined by our Board of Directors and the manner of distribution is determined by negotiation with the labor unions representing our
employees. However, under Brazilian law, the profit sharing plan will be subject to an annual limit equal to 25% of total proposed dividends for the year.
Our profit sharing distributions to our employees within the entire Petrobras Group were R$783 million (U.S.$295 million) for 2004, R$894 million (U.S.$291 million) for 2003 and R$444 million (U.S.$152 million) for 2002. At Petrobras annual general shareholders meeting held on March 31, 2005, its shareholders approved a profit sharing distribution to Petrobras employees (excluding subsidiaries) of R$660 million (U.S.$248 million) for 2004. In April and May 2005, Petrobras approved an additional profit sharing distribution totalling R$66.0 million (U.S.$29.9 million) to complement this amount. Our subsidiaries approved a total profit sharing distributions to their employees of R$123 million (U.S.$46 million) at their annual general shareholders meetings in March 2005.
Our Pension and Health Care Plans
We sponsor a contributory defined benefit pension plan known as PETROS, which covers approximately 80% of our employees. The principal objective of PETROS has been to supplement the social security pension benefits of our employees, as well as employees of our subsidiaries and affiliates, certain other companies and PETROS itself. Employees that participate make mandatory monthly contributions. Our historical funding policy has been to make annual contributions to the plan in the amount determined by actuarial appraisals. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. We made contributions of U.S.$435 million in 2004, as compared to contributions of U.S.$402 million in 2003. We recorded a liability of U.S.$3,081 million in 2004, U.S.$2,055 million in 2003 and U.S.$1,452 million in 2002 for the excess of the actuarial value of our obligation to provide future benefits over the fair value of the plan assets used to satisfy that obligation. See Note 18 to our audited consolidated financial statements.
In addition, some of our consolidated subsidiaries, including PEPSA and Liquigás, have defined benefit plans with substantially similar items.
On May 11, 2001, our board of directors approved the creation of a new mixed benefit plan for existing, active and inactive employees. The plan, Petrobras VIDA, was designed to attract and retain qualified professionals and to reduce our pension obligations. The Secretaria de Previdência Complementar (Supplemental Pension Plan Secretariat), the government entity empowered to authorize the creation of pension plans in Brazil, and other relevant authorities, approved the plan on September 20, 2001. In 2004, we cancelled the Petrobras VIDA plan as a result of certain legal proceedings filed by the Oil Workers Federation in connection with the plan. See Item 8. Financial InformationLegal ProceedingsLabor Claims.
Since the PETROS plan is not admitting new participants since August 9, 2002, employees hired since that date are covered by specific insurance policies, and will continue to be covered by such policies until we are able to offer them a supplemental pension plan.
During the negotiation of our collective bargaining agreement in 2003, a working group composed of representatives of Petrobras, the Oil Workers Federation and PETROS was created to evaluate our current pension system and formulate recommendations for change. The working group presented its preliminary conclusions to our management in 2004, but our management has requested additional information, which has not yet been provided.
We maintain a health care benefit plan (AMS), which offers defined benefits and covers all employees (active and inactive) together with their dependents. We manage the plan, with the employees contributing fixed amounts to cover principal risks and a portion of the costs relating to other types of coverage in accordance with participation tables defined by certain parameters, including salary levels.
Our commitment related to future benefits to plan participants is calculated on an annual basis by an independent actuary, based on the Projected Unit Credit method. The health care plan is not funded or otherwise collateralized by assets. Instead, we make benefit payments based on annual costs incurred by plan participants.
The actuarial gains and losses arising from the differences between the actuarial assumptions and the costs effectively incurred are respectively included or excluded when defining the net actuarial liability. These gains and losses are amortized over the average remaining service period of the active employees. In 2004, we have revised
some of these actuarial assumptions. See Item 5. Operating and Financial Review and ProspectsCritical Accounting Policies and EstimatesPension and Other Post-Retirement Benefits
With the exception of sixteen employees of PEL, PIFCos personnel consist solely of Petrobras employees, and PIFCo relies on Petrobras to provide all administrative functions.