Pension management is an important topic for HR managers. Not only because it offers employees financial security, but also for attracting and retaining talent. Many HR managers encounter a number of practical problems with regard to pension management. In this blog, we discuss the main challenges and offer practical solutions for a future-proof pension policy.
In a tight labour market, pension is a strategic tool for attracting and retaining talent. Employees have diverse expectations, depending on their age, financial situation, and personal goals. Employers must therefore ensure they offer a pension scheme that is both attractive and flexible.
Many traditional pension schemes offer little room for customisation, while employees increasingly need more control and freedom of choice. Creating a future-proof and flexible pension policy is therefore an important challenge for HR managers.
How do you give your employees the flexibility they expect? And how do you also ensure they genuinely value the pension, given that this is often seen by younger employees as a “far-off concern.” These are questions HR managers struggle with.
Managing the costs for pension schemes is a challenging issue for employers. Collective schemes can heavily burden an organisation's financial resources, while flexible third-pillar solutions offer more customisation. Determining a fair and feasible employer contribution, without affecting business results, also remains a delicate balance. HR managers must find a balance between offering attractive pension provisions and safeguarding the organisation's financial capacity. Whether it concerns collective pension schemes or individual third-pillar options, insight into costs and smart choices are essential.
A frequently asked question is also: “how do I calculate the correct contribution for a pension?” This depends on the chosen pension scheme and your organisation's financial capacity:
Practical example: For an employee with a pensionable salary of €40,000 and a premium percentage of 20%, where the employer contributes 60% of the premium, the calculation is:Employer contribution = €40,000 × 0.20 × 0.60 = €4,800 per year.
By using a clear calculation, you can make contributions predictable and manageable for your organisation.
Another question we often hear is, “can I adjust the contribution later based on what happens within my organisation?” And we wholeheartedly say yes to that. At least, within a third-pillar pension, the employer's contribution is optional. So, if things are going a bit worse, or better, you can simply adjust the contribution. However, you must then explain this adjustment to your employees.
Unfortunately, such adjustments are not possible within a collective scheme, or at least, they can be difficult. An employer who wants to implement changes in a pension agreement must have the employees' approval. An employer is only allowed to unilaterally adjust the pension scheme in exceptional situations, when there is an important interest in the proposed change. So this is less flexible, and if you, as a start-up or scale-up, do not have the financial capacity for this, it becomes difficult, because pensions must be paid through.
Managing pension schemes often entails a significant administrative burden. HR managers must not only calculate premiums and reconcile them with pension funds or insurers, but also ensure clear communication towards employees. With collective pension schemes (second pillar), employers are often responsible for paying the premiums and managing the administration. With third-pillar solutions, this burden lies more with the employee, but HR remains involved in informing and guiding employees. This requires a good balance between efficiency and clarity.
When managing pension schemes, it is not only important that employers properly understand their contributions, but also that employees know how they can actively contribute to their pension themselves. This often raises the question: how does an employee calculate their own contribution?
Employees can calculate their own contribution by following these steps:
Practical example: An employee with a pensionable salary of €40,000, who then contributes 20% of the salary themselves, ultimately puts €4,000 into the pension pot. With an employer match of 50%, the employer contributes an additional €2,000 (if no limit is indicated). Own contribution = €40,000 × 0.20 = €4,000 per year, and receives an extra €2,000 from the employer.
By making these calculations transparent, employees are encouraged to actively contribute to their pension accrual. Of course, remember that your contribution now comes from your net salary - and you will get the taxes back later, in the summer.
Of course, as an HR manager, you are already aware of these problems. But how can you solve them now? Read on quickly to find out.
Addressing the challenges surrounding pension management requires a strategic approach. Here are targeted solutions that align with the three main problems: attractive employment conditions, cost control, and administrative burdens.
Employees expect more control and freedom of choice in their pension schemes. By making the pension attractive, you not only strengthen the trust of your employees but also improve your employer brand.
Cost control revolves around transparency and smart choices, so that you as an employer find a balance between attractive pension options and financial sustainability.
Efficiency in administration not only saves time but also prevents errors and misunderstandings that can damage confidence in the pension policy.
Why this works
With a strategic approach, you as an HR manager can turn practical problems into opportunities. By offering customisation, smartly managing costs, and efficiently organising administration, you strengthen the trust and commitment of employees. At the same time, you lay the foundation for a future-proof and effective pension policy.
Pension management is a complex part of HR management. It not only offers financial security for employees but also plays a key role in attracting and retaining talent. As discussed in this blog, HR managers face challenges in the areas of attractive employment conditions, cost control, and administrative efficiency.
By focusing on customisation, smart cost strategies, and streamlined processes, these challenges can be turned into opportunities. Implementing flexible pension options, using digital tools, and involving external experts not only helps to alleviate the workload but also strengthens the trust and satisfaction of employees.
A future-proof pension policy shows that organisations not only have an eye for today's needs but also for the financial future of their employees. HR managers play a central role in this, and with the right approach, they can contribute to a strong employer brand and sustainable business operations.
Invest in a strategic pension policy that suits the needs of your employees AND organisation. The right choices today lay the foundation for a stable and successful future.