Pension is an expensive employment condition for entrepreneurs. Due to the corona crisis, many companies and sectors are losing a large part of their turnover. However, costs such as pension contributions continue regardless. What options does the employer have when it comes to payment of the pension contribution and the pension scheme itself?
1. Use the NOW scheme
From April 6 at the latest, an employer who has lost at least 20% in turnover can receive wage subsidy from the government NOW scheme. This is a maximum of 90% of the wage bill. Pension contributions (employer and employee share) do not fall under that wage concept. However, the NOW scheme provides an extra subsidy of 30% on top of wages, precisely so that employer costs relating to pensions, holiday allowance and other employer costs are also reimbursed by the government. This means that using the NOW offers the possibility of compensation for pension contributions. However, it is important to note that because the total pension contribution is sometimes already 15-20% of the employer’s costs, the NOW subsidy may not be sufficient to compensate for the contribution burden (separate from the maximum percentage of 90).
2. Temporarily do not pay a pension premium to the pension provider
The employer must always continue to pay the employee’s contribution, which he deducts from the employee’s wages, to the pension provider. Sometimes the pension agreement does give the employer the option to temporarily reduce or terminate the employer’s contribution (the payment reservation); this offers an opportunity to save. However, this does not offer a solution for employers covered by a compulsory sectoral pension fund (Dutch: bedrijfstakpensioenfonds, herafter BPF); they depend on the leniency of the BPF.
Based on a letter from the Labour Foundation of 21 March 2020, it now appears that a number of BPFs do allow postponed payment of the employer’s premium, or are willing to make a convenient payment arrangement. Therefore, this can give a temporary break, but postponement is not an adjustment.
3. Change, cut back the entire pension scheme
For the majority of employers, change is not an option; they fall under a compulsory BPF and depend on a possible decision by the social partners to change the pension scheme. For employers with their own pension agreement, adjustment of the pension scheme is only possible with the express, deliberate consent of the employees. Alternatively, the employer can invoke a contractual clause for a unilateral change to the pension scheme, whereby he demonstrates that a “substantial business interest” necessitates the change to the disadvantage of the employee. The corona crisis, with all its financial consequences for the employer, can be such an “important interest”.
However, in doing so, the employer may face reproach for receiving compensation for those high premium costs through the NOW scheme, even if only partly. The corona crisis therefore also requires the employer to provide concrete financial substantiation for the need to change the pension scheme. This also requires the approval of the Works Council.
As an entrepreneur it is therefore particularly important to check whether the company remains able to pay the employer part of the pension contribution, even if the NOW wage cost subsidy is used. Deferral of payment is a possibility, but if that does not offer any relief, then the pension scheme may be changed.
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