In certain situations, businesses may not be obligated to perform a salary adjustment.
Working on pension plans can bring monetary rewards. Those who agree to a contract can secure a 15% discount from their boss. The specifics of older contracts have recently been addressed in court.
In the context of what's referred to as wage conversion for pension planning, even aging collective bargaining agreements can now substantially influence the employer's contribution, as per current law. This was upheld by the Federal Labour Court (BAG) in Erfurt on Tuesday (Case No. 3 AZR 285/23).
At this point, it's uncertain if employers can totally dodge the discount if an older collective agreement lacks participation provisions regarding wage conversion.
Wage conversion serves as a pension planning tool; employees have a legal entitlement to it. Throughout this process, a portion of wages is channeled into a pension fund or a straight-up insurance policy, commonly known as direct insurance. Typically, this is tax-friendly for both employees and employers.
Employers needed to share tax breaks starting 2018
Since 2018, it has become mandatory for employers to share a portion of these tax breaks with the employee. Specifically, they must provide a 15% subsidy for the wage conversion used for pension planning. Collective agreements can deviate from this.
In the ongoing case, a wood mechanic from Lower Saxony sought the subsidy. The relevant pension planning collective agreement hails from 2008 and already includes the option for wage conversion. Employees who opt for this also acquire an additional "pension planning basic amount" fully covered by the employer.
The BAG ruled in this case that even older agreements prior to 2018 can manage wage conversion as well as the subsidy. This has also been the scenario here with the "pension planning basic amount." Therefore, no additional 15% claim is warranted in this case.
The matter of whether the same applies to older agreements without employer participation provisions for wage conversion is still under scrutiny at the BAG.
In light of the court ruling, employers may leverage older collective bargaining agreements to influence their pension contributions, as seen in the mandatory 15% subsidy for wage conversion since 2018. Employers and employees alike can benefit from the tax-friendly nature of pension planning through wage conversion.
