18. Administrative expenses

The Employee Pension Programme (EPP) has been in place at the Bank since 2013. As part of the EPP (for employees who joined the Programme), until 9 December 2018 the Group accrued the basic contribution of 3% of the salary components on which social insurance contributions are accrued and from 10 December 2018 there was an increase in the basic contribution to 3.5%. Employees are entitled to declare additional contributions which are paid to the EPP by the Employer and deducted from the Employee’s salary. PPE is managed by PKO Towarzystwo Funduszy Inwestycyjnych SA.

Moreover, as part of wages and salaries the Group creates a provision for future liabilities in respect of compensation and severance bonuses paid out to employees with whom the employment relationship is terminated for reasons not related to the employees; and accruals related to costs attributable to the current period, which will be incurred in the next period, including bonuses and holiday pay, taking account of all unused holiday.

Overheads

The balance includes the following items: maintenance and lease of fixed assets, IT and telecommunications services, costs of administration, promotion and advertising, property protection and training.

Lease payments under an operating lease and subsequent instalments are recognized as an expense in the income statement and are recognized on a straight-line basis over the lease term.

Amortization and depreciation

Depreciation/amortization principles have been described in detail in the note “Intangible assets and property, plant and equipment”.

Contribution and payments to the bank guarantee fund

According to IFRIC 21 Levies, fees paid by the Group to the Bank Guarantee Fund are recognized in profit or loss upon the occurrence of the obligating event.

The Group makes contributions to the banks’ guarantee fund (quarterly) and the banks’ forced restructuring fund (annually). Contributions to the guarantee fund and the forced restructuring fund are not tax-deductible.

Taxes and fees

The following items are recorded here: property tax, payments made to the State Fund for Rehabilitation of Disabled Persons, municipal and administration fees.

The costs of operating lease on the part of the lessee are recognized in administrative expenses under overheads. Rental and lease contracts concluded by the Group as part of its normal operating activities also meet the definition of operating lease. All contracts are concluded on an arm’s length basis.

The lease and sub-lease payments recognized in the costs of a current period in 2018 amounted to PLN 209 million (in 2017 they amounted to PLN 277 million).