Occupational pension scheme: Benefits for employers and how to make the most of them
29 Apr 2025
5
Minutes
Katrin Straub
CEO at nextsure
Company pension schemes (bAV) are more than just a fringe benefit – they are a strategic tool for employers. Discover how you can profitably leverage the advantages of company pension schemes for your business while also doing something beneficial for your employees.
The topic in brief and concise terms
The occupational pension scheme (bAV) enhances 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 pensions since contributions are considered business expenses. [2,4,6]
Since 2019, there has been a requirement for employers to provide at least a fifteen percent subsidy for salary conversion when social security contributions are saved. [6,9,14]
Strengthen employee retention and recruitment through occupational pension schemes
An attractive company pension scheme is a strong argument in the competition for skilled workers. Studies show that for 37 percent of employees, the occupational pension scheme 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 worker shortages. [1,2]
Companies demonstrate appreciation and future planning for their employees with a company pension scheme. [3] Offering an occupational pension scheme can positively influence a company's image. [4,5] A well-communicated pension scheme underscores the employer's duty of care. [1] These measures contribute to a positive working environment and increased employee motivation. [5]
Realising cost savings and tax benefits
Occupational pension schemes offer employers significant financial advantages. By salary conversion, social security contributions are reduced for both employers and employees. [6,7] Employers can save almost twenty percent in social contributions for each euro employees pay into the occupational pension scheme (bAV). [7] Contributions to bAV are also tax-deductible as operating expenses, which lowers the company's overall tax burden. [6,8]
Since 2019, employers are required to provide a subsidy of at least fifteen percent when salary conversion results in savings on social security contributions. [6,9] This regulation has also applied to existing contracts since 2022. [6] The employer-funded bAV 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]
Understand legal framework and obligations
Since January 1, 2002, employers have been obliged to offer their employees an occupational pension scheme (bAV) through salary conversion. [6,10] This obligation applies if employees are compulsorily insured in the statutory pension scheme and are funding it themselves. [11,12] The Occupational Pensions Act (BetrAVG) regulates the legal basis of employment law. [13] It contains mandatory minimum standards to protect employees. [13]
Important aspects of the legal framework include:
Entitlement to salary conversion up to four percent of the contribution assessment ceiling. [14]
A mandatory employer contribution of at least fifteen percent for salary conversion (for new contracts since 2019, for existing contracts since 2022), provided social security contributions are saved. [6,14]
Tax-free contributions up to eight percent of the contribution assessment ceiling (with four percent exempt from social security contributions). [14,15]
Non-forfeitability of entitlements after certain periods (e.g., three years of service and reaching the age of 21). [16]
The Occupational Pensions Strengthening Act (BRSG) has introduced further improvements and incentives since 2018. [17,18] It is advisable to stay thoroughly informed about the current legal framework. [13]
Implementation methods of occupational pension schemes and their advantages for employers
Employers have five options for implementing occupational pensions. [19,20] Each option has specific characteristics and advantages. Choosing the right implementation path is crucial for the success of occupational pensions in the company. [19] Direct insurance is the most commonly used method and is characterised by low administrative effort. [21,22]
The five implementation options are:
Direct insurance: The employer takes out a life or pension insurance policy for the employee. [22,23]
Pension fund: A legally independent provision body into which employers and employees contribute. [22,23]
Pension funds: Offers flexible investment options and potentially higher returns, but also comes with higher risks. [22,23]
Support funds: A legally independent provision entity financed by the employer; contributions are often fully tax-free. [22,23]
Direct commitment (pension commitment): The employer directly commits to paying the pension benefits; requires balance sheet provisions. [22,23]
The choice of implementation path should consider the company's size, employee structure, and administrative capacities. [4] Advice on the implementation options can provide clarity here. Contributions to direct commitments and support funds can, for instance, be completely tax-free. [23,24]
Expert tips for optimal structuring of occupational pension schemes
Careful planning and communication are crucial for successful occupational pension schemes. Our expert tip: Define clear goals for your occupational pension scheme (bAV). Do you primarily want to retain employees or optimise costs? A clear pension plan is essential to establish who receives which benefits under what conditions. [6]
Utilise digital solutions to simplify the management of your occupational pension scheme contracts. [6] This significantly reduces administrative effort. Train your HR department or bring in external advisors to ensure competent employee consultation. [2,3] Active communication of the benefits of occupational pensions for employers and employees promotes acceptance and participation. [1]
Consider additional components such as disability insurance or survivor benefits. [1] These can further enhance the appeal of your occupational pension scheme. Regularly check if your pension scheme design is still up-to-date and meets the needs of your employees as well as legal requirements. The Occupational Pensions Reinforcement Act, for example, introduced changes to funding limits and subsidies. [17,18]
Fazit: Occupational pension schemes as a win-win situation for employers
Occupational pension schemes offer employers numerous benefits that go far beyond merely fulfilling a statutory duty. They are an effective tool for employee retention and recruitment, enable cost savings, and enhance the corporate 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 the most important resource of a company: its employees. [1,3] It demonstrates social responsibility and can increase motivation and productivity. [3,5] The value of an occupational pension scheme is therefore clear to employers. Take advantage of the opportunities offered by occupational pensions.
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More useful links
The website of the Federal Ministry of Labour and Social Affairs (BMAS) offers comprehensive information on occupational pensions.
At Laws in the Internet, you can find the full text of the Occupational Pensions Act (BetrAVG), which regulates the legal framework of occupational pensions.
The Working Group for Occupational Pensions e.V. (aba) provides up-to-date 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 offers further insights into occupational pensions.
A detailed PDF document from the German Bundestag illuminates various aspects of occupational pensions.
FAQ
What are the main advantages of occupational 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 fulfillment of the legal entitlement to salary conversion.
What costs does an employer save through occupational pension schemes?
Employers primarily save on social security contributions (around twenty percent of the conversion amount). [7] Additionally, contributions to occupational retirement provision can be claimed as business expenses, which reduces the tax burden. [6,8]
Do I have to pay a subsidy for occupational pension schemes as an employer?
Yes, if employees use salary conversion and you thereby save social security contributions, you must contribute at least fifteen percent of the conversion amount since 2019 (for new contracts) or 2022 (for existing contracts). [6,9,14]
What types of occupational pension schemes are available for employers?
There are five implementation methods: direct insurance, pension fund, pension fund, support fund, and direct commitment. Each method has specific advantages and disadvantages for employers. [19,20,23]
How does occupational pension provision help with employee recruitment?
An attractive occupational pension scheme is an important factor in the competition for skilled workers. It signals appreciation and future planning, which strengthens the employer brand and makes the company more attractive to applicants. [3,1,2,3]
What does the Betriebsrentenstärkungsgesetz (BRSG) regulate for employers?
The BRSG, in effect since 2018, aims to make occupational pensions more attractive. Important points for employers include the mandatory contribution in salary conversions, enhanced tax incentives, and the introduction of the social partnership model. [17,18,25]
