Company pension scheme: benefits for employers and how you can make the most of it
29.04.25
5
Minutes
Katrin Straub
Managing Director at nextsure
The occupational pension scheme (bAV) is more than just an extra benefit – it is a strategic tool for employers. Discover how you can make profitable use of the advantages of occupational pension provision for your business while also doing something good for your employees.
The topic in brief and concise terms
Occupational pension provision (bAV) increases employee retention and employer attractiveness as an employer, particularly in the competition for skilled workers. [1,3,1]
Employers can save on social security contributions and taxes through occupational pension schemes (bAV), as contributions are treated as business expenses. [2,4,6]
Since 2019, there has been a requirement for an employer contribution of at least fifteen per cent when salary conversion is used, if social security contributions are saved. [6,9,14]
Strengthening employee retention and recruitment through occupational pension provision
An attractive occupational pension scheme is a strong argument in the competition for skilled workers. Studies show that for 37 per cent of employees, occupational pension provision was a reason for choosing their current employer. For 50 per cent, it is a reason to stay with the company. It increases attractiveness as an employer and promotes workforce loyalty. This is a particularly important factor in times of skilled labour shortages. [1,2]
With an occupational pension scheme, companies signal appreciation and future planning for their employees. [3] Offering an occupational pension scheme can positively influence a company's image. [4,5] A well-communicated occupational pension scheme underlines the employer's duty of care. [1] These measures contribute to a positive working atmosphere and increased employee motivation. [5]
Realise cost savings and tax advantages
The occupational pension provision offers employers significant financial advantages. Through salary sacrifice, social security contributions are reduced for both employers and employees. [6,7] Employers can therefore save almost twenty per cent in social security contributions for every euro employees pay into the occupational pension scheme. [7] Contributions to the occupational pension scheme are also tax-deductible as business expenses, which lowers the company’s overall tax burden. [6,8]
Since 2019, employers have been required to make a top-up contribution of at least fifteen per cent for salary sacrifice arrangements if they save on social security contributions. [6,9] This rule has also applied to existing contracts since 2022. [6] The employer-financed occupational pension scheme can therefore be more cost-effective than a direct salary increase. [7] The exact savings depend on the contribution amount and the tax situation. [6]
Know the legal framework and obligations
Employers have been required since 1 January 2002 to offer their employees an occupational pension scheme (bAV) by means of salary conversion. [6,10] This obligation applies where employees are compulsorily insured in the statutory pension insurance scheme and finance it themselves. [11,12] The Occupational Pensions Act (BetrAVG) regulates the labour-law foundations. [13] It contains mandatory minimum standards to protect employees. [13]
Important aspects of the legal framework include:
Entitlement to salary conversion of up to four per cent of the contribution assessment ceiling. [14]
Mandatory employer contribution of at least fifteen per cent for salary conversion (for new contracts since 2019, for existing contracts since 2022), provided social security contributions are saved. [6,14]
Tax-free contributions of up to eight per cent of the contribution assessment ceiling (of which four per cent are exempt from social security contributions). [14,15]
Vesting of entitlements after certain periods (e.g. three years' service and completion of the age of 21). [16]
The Company Pensions Strengthening Act (BRSG) has created further improvements and incentives since 2018. [17,18] It is advisable to familiarise yourself comprehensively with the current legal framework. [13]
Ways to implement occupational pension provision and their benefits for employers
Employers have five implementation options available for occupational pension provision. [19,20] Each option has specific characteristics and advantages. Choosing the right implementation route is crucial to the success of the company pension scheme. [19] The direct insurance policy is the most commonly used option and is characterised by low administrative effort. [21,22]
The five implementation options are:
Direct insurance policy: The employer takes out a life insurance or pension insurance policy for the employee. [22,23]
Pension fund: A legally independent pension provider into which employers and employees make contributions. [22,23]
Pension fund: Offers flexible investment options and potentially higher returns, but is also associated with higher risks. [22,23]
Support fund: A legally independent pension provider financed by the employer; contributions are often fully tax-free. [22,23]
Direct commitment (pension commitment): The employer undertakes to pay the pension benefits directly; requires provisions to be recognised in the balance sheet. [22,23]
The choice of implementation route should take into account the company size, the workforce structure and the administrative capacity. [4] Advice on the implementation options can provide clarity here. For example, contributions to direct commitments and support funds can be fully tax-free. [23,24]
Expert tips for the optimal design of bAV
Careful planning and communication are crucial for a successful occupational pension scheme. Our expert tip: define clear objectives for your occupational pension scheme. Do you primarily want to retain employees or optimise costs? A clear pension scheme policy is essential to define who receives which benefits under what conditions. [6]
Use digital solutions to simplify the administration of your occupational pension contracts. [6] This significantly reduces administrative effort. Train your HR department or bring in external consultants to ensure expert advice for your employees. [2,3] Active communication of the benefits of occupational pension provision for employers and employees promotes acceptance and participation. [1]
Consider additional components such as income protection insurance or survivor benefits. [1] These can further increase the appeal of your occupational pension scheme. Regularly review whether the design of your occupational pension scheme is still up to date and meets the needs of your employees as well as legal requirements. The Occupational Pensions Strengthening Act, for example, brought changes to the funding limits and subsidies. [17,18]
Conclusion: bAV as a win-win situation for employers
Company pension schemes offer employers numerous advantages that go far beyond simply fulfilling a statutory obligation. They are an effective tool for retaining and attracting employees, enable cost savings and strengthen the company's image. By choosing the appropriate implementation route and designing the scheme carefully, companies can maximise the positive effects. [19,4]
A well-implemented company pension scheme is an investment in a company's most important resource: its employees. [1,3] It demonstrates social responsibility and can increase motivation and productivity. [3,5] The benefits of a company pension scheme are therefore clear for employers. Make the most of the opportunities offered by company pension provision.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific suggestions for improvement.
More useful links
The website of the Federal Ministry of Labour and Social Affairs (BMAS) provides comprehensive information on occupational pensions.
Under Laws on the Internet you can find the full text of the Occupational Pensions Act (BetrAVG), which governs the legal basis for occupational pensions.
The Working Group for Occupational Pensions e.V. (aba) provides current statistics on the prevalence of occupational pensions.
Further information on employees with active entitlements in occupational pensions is provided by the Working Group for Occupational Pensions e.V. (aba).
An informative brochure on occupational pensions is available on the website of the German Pension Insurance.
A publication by the Federal Government provides further insights into occupational pensions.
A detailed PDF document from the German Bundestag highlights various aspects of occupational pensions.
FAQ
What are the main benefits of company pension schemes for employers?
The main advantages are employee retention and motivation, savings on social security contributions and taxes, increased attractiveness as an employer, and fulfilment of the statutory entitlement to salary conversion.
What costs can an employer save through occupational pension provision?
Employers primarily save on social security contributions (approx. twenty percent of the conversion amount). [7] In addition, contributions to the occupational pension scheme can be claimed as business expenses, which reduces the tax burden. [6,8]
Do I, as an employer, have to pay a contribution to the company pension scheme?
Yes, if employees use salary sacrifice and you thereby save social security contributions, since 2019 (for new contracts) or 2022 (for existing contracts) you must contribute at least fifteen per cent of the conversion amount. [6,9,14]
What implementation options are available to employers for occupational pension provision?
There are five implementation methods: direct insurance, pension fund, pension scheme, support fund and direct commitment. Each method has specific advantages and disadvantages for employers. [19,20,23]
How does a company pension scheme help attract employees?
An attractive occupational pension scheme (bAV) is an important argument in the competition for skilled professionals. It signals appreciation and long-term planning, strengthening the employer brand and making the company more attractive to applicants. [3,1,2,3]
What does the Occupational Pensions Strengthening Act (BRSG) regulate for employers?
The BRSG, in force since 2018, aims to make occupational pension provision (bAV) more attractive. Important points for employers are the mandatory top-up for salary conversion, expanded tax incentives and the introduction of the social partner model. [17,18,25]
