Arrangements for your employees
The rapid changes in legislation concerning employee rights, sickness, and absence mean that for many SMEs, it is almost impossible for entrepreneurs to keep their knowledge up to date. We would like to identify with you the risks your company is exposed to. This includes (financial) risks in the event of (long-term) illness of an employee, poor employee performance, or a workplace accident.
It's also important for you as a business owner to offer good employment conditions. This doesn't just mean good financial terms; consider also a positive working environment, the ability to balance work and private life flexibly, and opportunities for your employees to develop their skills. All these aspects cost money and are provided by different parties. Therefore, it's important for you to make the right choices.
Important additional financial employment conditions include a pension, Work-related Incapacity Benefit insurance, and accident insurance.
What about company pensions?
Of course, you want to take good care of your employees. Offering a collective pension is one of the most important employment benefits. However, for you as an employer, this comes with a hefty price tag. It therefore begs the question whether offering a pension scheme is always the best option. Sometimes, it can be advantageous for both you as an employer and your employees not to have a collective pension scheme.
Many employers are obliged to offer a pension to their employees. This obligation is then laid down in a collective labour agreement or because you are obliged to join a sectoral pension fund.
Employers for whom such an obligation does not apply often still offer a pension scheme. To make a choice that suits your company, it is important to get good advice on the possibilities.
In addition, there are also the necessary changes taking place in the area of pensions. From 01-01-2018, the pension reference age will be increased to 68. The maximum accrual percentages have remained the same; however, the distribution of these will start a year later. The maximum contribution for available premium schemes has been slightly reduced. No more pension benefits can be built up tax-efficiently on income exceeding €128,810 per year. However, a net pension scheme is possible for incomes above this amount.
There are essentially two types of pension schemes available: a target benefit scheme, such as a final salary or average salary scheme, or a defined contribution scheme.
The WPT Act is currently expected to be introduced. This will be accompanied by significant changes. As soon as the Act has been introduced, we will provide the correct information here.
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With the final salary pension scheme, the pension payout is the starting point. In this pension scheme, the employee receives a pension based on the average salary of their career. Upon reaching retirement age, the accrued pension capital is converted into a lifelong, guaranteed monthly pension payment.
With this pension scheme, salary increases only apply to the pension accrual for future years of service. This limits the premium increase.
The advantage for employees is that they receive a guaranteed pension.
Naturally, this scheme also ensures survivor's pensions and orphan's pensions. The level of the pensions is a derivative of the old-age pension to be achieved. Often, additional continued pension accrual in case of disability is also insured.
End of the line
In a final salary pension scheme, the pension payout is the starting point. Under this pension scheme, the employee receives a pension based on the final salary of their career. Upon reaching retirement age, the accrued pension capital is converted into a lifelong, guaranteed monthly pension payout.
With this pension scheme, salary increases also affect the accrual of pension for already completed years of service. If the salary increases, not only will the premium for the pension yet to be accrued increase, but a backservice premium will also have to be paid to purchase pension retroactively for all completed years of service.
The advantage for employees is that they will receive a guaranteed pension, which is based on their final salary.
The premium for target benefit schemes is highly dependent on the interest rate used for calculation. The insurer often guarantees this interest rate for the duration of the contract. Currently, there is a historically low interest rate. Life expectancy is also increasing. The consequence is that the costs for the lifelong payout guarantee are also increasing.
For many contracts that are now due for renewal (or are to be entered into for the first time), this leads to significant cost increases. As an indication: an actuarial interest rate that is 1% lower usually results in a cost increase of approximately 30%. Many employers are therefore considering no longer offering this type of scheme, or, for example, offering it only up to a certain maximum salary. These schemes are therefore often converted into defined-contribution schemes.
Naturally, these arrangements also insure survivor's pensions and orphan's pensions. The amount of the pensions is derived from the attainable old-age pension. Often, continued pension accrual in the event of incapacity for work is also insured as a supplement.
Available premium scheme
In the available premium scheme, the pension premium is the starting point. In this pension scheme, the amount of the pension depends on the amount of premiums paid in and on the choices made by the employer.
The premium is a percentage of the pensionable income. This is the part of your salary on which you build up a pension. The higher the premium, the higher the final pension can be.
There are fiscal upper limits for the premium amount. The Tax Authorities use so-called scales for this, in which the premium increases with age.
In addition, a premium is paid for insuring survivor's pension, orphan's pension and/or disability pension. Furthermore, costs are charged for the administration of the pension scheme.
The premiums for the pension scheme can be invested. The amount of pension capital will depend on the investment results. These can, of course, be lower or higher than expected. There is no guarantee on the pension capital.
The premium for building up a pension is invested. Generally, the investor opts for Life Cycle investing. This is a method where the risk profile of the investment portfolio for the participant changes based on their age. As the participant gets older (and closer to their retirement age), the total risk of the investment portfolio is reduced.
It is also possible to opt for a guaranteed final capital sum.
When the pension capital is paid out on the retirement date, your employees purchase an annuity for this purpose. The amount of the annuity has not yet been fixed. This depends, among other things, on the interest rate at the time of the pension purchase and on the life expectancy at that time.
The advantage of this pension scheme is that the premium is fixed. This means you know exactly where you stand. The benefit for employees is that, in the case of investments, they can choose how the premium is spent with some products. After the pension capital has been paid out, they can decide for themselves which insurer they will buy a periodic pension payout from.
Pension scheme choice
Choosing a good pension scheme is of great importance. Among other things, you should consider:
- The budgetary aspects,
- Your pension ambition level as an employer
- a market comparison of competing employers,
- the fiscal regulations and
- The costs of implementation.
To arrive at a well-considered choice, it is essential to conduct a thorough analysis of the objectives and possibilities. We are happy to assist you with this. Based on this analysis, we will then design a suitable pension scheme together with you. Naturally, we will take into account statutory obligations and fiscal (im)possibilities. Subsequently, in consultation with you, we will implement this draft scheme with concrete products. For this purpose, we will compare the offerings of various insurers.
In some cases, the outcome may be that it is a better choice to give your employees a “pension budget” through a gross salary increase. This will then allow employees to make their own choices on a customised basis when building up sufficient provisions.
We are happy to assist you in shaping your pension policy. We also support you with the concrete implementation of this, with selecting an insurer, and with managing your pension contract.
What to do in case of absence?
If your employee falls ill, this can have significant financial consequences. Work comes to a standstill while you still have to pay their wages. In cases of long-term illness, the costs for their reintegration are added to.
For the first two years, you are obliged to continue paying the wages of your employee who is unable to work. The minimum amount to be paid is 70% of the wage (subject to a cap of 70% of a maximum of €66,957). Many collective agreements or company-specific terms and conditions of employment contain additional provisions for a higher level of continued payment.
Employer costs are expenses on top of wage costs that you have to pay, such as employer contributions for social insurance. These costs will also continue to be incurred when your employee is ill.
With absence insurance, you can insure yourself against the financial consequences of the two-year salary continuation and, if applicable, employer costs. You can choose an excess period. This means that for each case of illness, the salary costs falling within this period will not be reimbursed. For example, you can choose between 10 or 30 days of excess.
In addition to financial cover, absence insurance typically also offers cover/support to meet other obligations.
- This ‘Verbetering Poortwachter’ Act places a duty on you to do everything possible to reintegrate your employee during the first two years. The employee may return to their own position, or they may be given a different position within your company or at another company.
If you have not made sufficient efforts, the UWV can impose a sanction on your WIA application. The absence insurer will support you throughout this process and will guarantee that you have met your legal obligations if you have followed all instructions from, for example, the insurer and the occupational health service. Should you unexpectedly still receive a sanction from the UWV, it will be reimbursed by the insurer. - You are obliged to arrange absence management. This means you must enter into a contract with a company doctor's service or a company doctor. With many absence insurance policies, this company doctor's service is offered at an attractive rate.
- With additional legal assistance cover, you will receive legal help to recover damages incurred that are not covered by your business interruption insurance. For example, loss of earnings during the excess period.
After two years of illness, your employee may be eligible for a WIA (Work and Income Benefits Act) benefit. If all statutory obligations of the ‘Poortwachter Improvement Act’ have been met, you are no longer obliged to continue salary payments. However, if an employee leaves employment due to illness, this may still have consequences for the differentiated WIA premium that you pay as an employer. For this premium, you have the choice to pay it to the UWV (Employee Insurance Agency) via employer contributions or to become a self-insured employer. Read more about this in “What you need to know about WGA/ER”.
The statutory WIA benefit for your employee is often considerably less than what your employee earned. With a supplementary collective WIA insurance, you can ensure that these consequences are limited. Read more about this in “What you need to know about WIA Supplementary Benefit”.
To help the SME sector, a new absence management insurance policy is available from 01-01-2020. Insurers have developed a single collective insurance policy with full coverage. Additionally, SME companies will receive a discount on social premiums. This package is intended to reduce the risks of continued salary payments during illness for SME companies.
What you need to know about WGA/ER
If your employee has been unable to work due to illness for two consecutive years, they will receive a disability benefit (WIA benefit) through the UWV. As an employer, you pay a differentiated premium to the UWV for this. You can also choose to become a self-insured employer. In this case, the differentiated premium you pay to the UWV will cease. However, you will then also be responsible for the continued payment of WGA benefits to your employee for the following 10 years. You can reinsure this risk with an insurer.
As of 1 January 2013, the Work, Health and Safety (WHS) Act came into effect. As an employer, you will be subject to new employer contributions for both permanent employees and temporary contract employees. The contributions for the sickness benefit scheme have also been amended. There have also been significant changes regarding the possibilities of becoming a self-insurer.
This insurance requires a bespoke solution. If you are interested, please contact us.
What you need to know about WIA Supplementary Benefit
WIA is a disability benefit paid after long-term illness.
For employees, there is almost always a very significant drop in income if they end up in the WIA (Work and Income Act). It is almost impossible to take out an adequate supplementary insurance in the private sphere. You, as an employer, can play an important role in this by offering collective supplementary WIA insurance.
Business legal expenses insurance provides independent legal assistance. The insurance covers legal and court costs, as well as the additional costs of bailiffs, experts, and witnesses.
The amount of the WIA benefit depends on the degree of incapacity for work and on the income still earned by the incapacitated employee.
Various cover options are possible:
- WGA-Gat insurance Standard
This will provide your employee with a supplement to their WGA follow-up benefit. The amount of this supplement will depend on the disability percentage.
- WGA-Gat Extended Insurance
With the WGA-Gat Comprehensive insurance, your employee will receive a supplement of up to 70% on top of their wages. Plus an extra 5% if they earn enough from work.
- WIA Fixed Supplement AOV
With the WIA Fixed Supplement AOV, your employee receives a fixed amount in the event of disability.
- WIA Excess Insurance
The WIA Surplus insurance is particularly interesting for employees with an income above €66,957.
- WIA Income Supplement Insurance
This insurance pays out a sum to employees who are unable to work for less than 35% over a specified period.
You need accident insurance for your employees
Employers are obliged under the Civil Code to behave as a ‘good employer’. Accident insurance for employees helps to fulfil that obligation.
Accident insurance provides your business and/or your employees with a one-off payout if an employee becomes permanently disabled due to an accident. If an employee dies as a result of an accident, their next of kin will receive a payout.
Such insurance is also often compulsory in various industries. Even when a collective accident insurance is not compulsory, the insurance forms a good employment benefit.
As an employer, accident insurance also offers protection for financial consequences in the event of an employee liability claim.
