Investment & Wealth
Occupational pension scheme
occupational pension benefits employer
Occupational Pension Schemes: Benefits for Employers and How to Make the Most of Them
Company pension schemes (bAV) are more than just an additional benefit – they are a strategic tool for employers. Discover how you can profitably leverage the benefits of company pension schemes for your business while also doing something positive for your employees.
The topic in brief and concise terms
Company pension schemes (bAV) enhance employee retention and attractiveness as an employer, especially in the competition for skilled workers. [1,3,1]
Employers can save on social security contributions and taxes through occupational pension schemes, as contributions are considered business expenses. [2,4,6]
Since 2019, there has been a requirement for employers to contribute at least fifteen percent to salary conversion if social security contributions are saved. [6,9,14]
Strengthen employee retention and recruitment through occupational pension schemes
An attractive company pension plan is a strong argument in the competition for skilled workers. Studies show that for 37 percent of employees, the occupational pension was a reason for choosing their current employer. For 50 percent, it is an argument to stay with the company. It enhances the attractiveness as an employer and promotes employee loyalty. This is an important factor, especially in times of skilled labor shortages. [1,2]
Companies signal appreciation and future planning for their employees with a company pension plan. [3] Offering an occupational pension can positively influence a company's image. [4,5] A well-communicated company pension plan underscores the employer's duty of care. [1] These measures contribute to a positive work environment and increased employee motivation. [5]
Realise cost savings and tax benefits
Company pension schemes offer employers significant financial advantages. By salary conversion, employers and employees reduce their social insurance contributions. [6,7] Employers can save almost twenty percent in social security contributions for every euro that employees pay into the company pension scheme. [7] Contributions to the company pension scheme are also tax-deductible as business expenses, reducing the company's overall tax burden. [6,8]
Since 2019, employers are required to provide a subsidy of at least fifteen percent for salary conversion if they save on social security contributions. [6,9] This regulation has also applied to existing contracts since 2022. [6] The employer-financed company pension scheme can thus 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 obliged since January 1st, 2002, to offer their employees an occupational pension scheme (bAV) within the scope of salary conversion. [6,10] This obligation exists when employees are mandatorily insured under the statutory pension scheme and take on the financing themselves. [11,12] The Occupational Pensions Act (BetrAVG) regulates the employment law fundamentals. [13] It contains mandatory minimum standards for the protection of employees. [13]
Important aspects of the legal framework include:
Right to salary conversion of up to four percent of the contribution assessment ceiling. [14]
Mandatory employer subsidy of at least fifteen percent for salary conversion (for new contracts since 2019, for existing contracts since 2022), provided social insurance contributions are saved. [6,14]
Tax-free contributions up to eight percent of the contribution assessment ceiling (of which four percent are exempt from social insurance). [14,15]
Non-forfeitability of entitlements after certain periods (e.g. three years of employment and the completion of the 21st year of age). [16]
The Act to Strengthen Occupational Pensions (BRSG) has introduced further improvements and incentives since 2018. [17,18] It is advisable to be thoroughly informed about the current legal framework conditions. [13]
Implementation methods of occupational pension schemes and their benefits for employers
Employers have five options available for implementing occupational pension schemes. [19,20] Each option has specific characteristics and advantages. Choosing the right implementation method is crucial for the success of occupational pensions within the company. [19] Direct insurance is the most commonly used method and is characterised by low administrative effort. [21,22]
The five implementation methods are:
Direct insurance: The employer takes out a life or pension insurance policy for the employee. [22,23]
Pension fund: An independent legal entity, funded by both employers and employees. [22,23]
Pension fund (fonds): Offers flexible investment opportunities and potentially higher returns, but also comes with higher risks. [22,23]
Support fund: An independent legal entity, financed by the employer; contributions are often fully tax-exempt. [22,23]
Direct commitment (pension commitment): The employer directly commits to providing the pension benefits; requires balance sheet provisions. [22,23]
The choice of implementation method should take into account the size of the company, employee structure, and administrative capacities. [4] A consultation on implementation methods can provide clarity here. Contributions to direct commitments and support funds can, for instance, be fully tax-exempt. [23,24]
Conclusion: Occupational pensions as a win-win situation for employers
Occupational pensions offer employers numerous advantages that extend far beyond merely fulfilling a statutory obligation. It is an effective tool for employee retention and recruitment, enables cost savings, and enhances the company’s image. By choosing the appropriate implementation method and a well-thought-out design, companies can maximise the positive effects. [19,4]
A well-implemented occupational 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 relevance of an occupational pension scheme is therefore clear to employers. Take advantage of the opportunities that an occupational pension offers you.
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More useful links
The website of the Federal Ministry of Labour and Social Affairs (BMAS) provides comprehensive information on occupational pensions.
Under Laws in the Internet, you will find the full text of the Occupational Pensions Act (BetrAVG), which governs the legal foundations of the occupational pension.
The Working Group on 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 offered by the Working Group on 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 offers further insights into occupational pensions.
A detailed PDF document from the German Bundestag highlights various aspects of occupational pensions.
FAQ
What are the main advantages of occupational pensions for employers?
The main advantages are employee retention and motivation, savings on social security contributions and taxes, increased attractiveness as an employer, and fulfilling the legal entitlement to salary conversion.
What costs do employers save through occupational pensions?
Employers primarily save on social security contributions (around twenty percent of the conversion amount). Additionally, contributions to occupational pensions can be claimed as business expenses, reducing the tax burden.
Do I have to pay a subsidy as an employer towards occupational pensions?
Yes, if employees use salary conversion and you save on social security contributions as a result, you must contribute at least fifteen percent of the conversion amount since 2019 (for new contracts) or 2022 (for existing contracts).
What implementation options are available for employers for occupational pensions?
There are five implementation options: direct insurance, pension funds, pension schemes, support funds, and direct commitments. Each option has specific advantages and disadvantages for employers.
How do occupational pensions assist in employee recruitment?
An attractive occupational pension is an important factor in the competition for skilled workers. It signals appreciation and future planning, strengthening the employer brand and making the company more appealing to applicants.
What does the Occupational Pensions Strengthening Act (BRSG) regulate for employers?
The BRSG, in effect since 2018, aims to make occupational pensions more attractive. Key points for employers include the mandatory subsidy for salary conversion, extended tax incentives, and the introduction of the social partner model.
