The employer and the employee both pay into an earnings-related pension for the employee. The employer automatically withholds the employee’s share of the contribution from their wages and posts the total contribution to the pension provider.
Every year, the Ministry of Social Affairs and Health sets the pension insurance contribution for that year. Both wage earners and employers have the right to deduct the pension contributions they have paid in their own taxation.
Except for sailors, private sector employees are insured under the Self-employe Persons’ Pensions Act.
|Employee’s and employer’s contribution in 2018|
|Age or employee||Contribution rate|
|Under 53 and over 62||6.35%|
|Between 53 and 62||7.85%|
|Employers’ average contribution||17.75%|
|The final contribution rate of the employer may vary by several percentage points depending on the employer.|
Employer with an insurance contract
An employer who constantly employs people and whose wage bill for a six-month period reaches a certain limit set each year (€8,346 in 2018) is an employer with an insurance contract.
An employer with an insurance contract arranges its employees’ pensions with a separate pension insurance. The insurance must be taken out in the month after the wage was paid.
The grounds for the contribution of an employer with an insurance contract depends on the total wage bill of the employer. As a rule, an employer with an insurance contract whose total wage bill is less than €2,0595 billion per year (in 2018) pays contributions to a fixed rate of 25.3% (in 2018; including the employee’s share of the contribution).
If the wage sum of the insured employees is more than €2,0595 billion per year, the disability pensions granted to the employees affect the employer’s contribution rate. A customer bonus that is company-specific and based on the customer relationship, may also reduce the contribution of an employer with an insurance contract.
An employer who does not constantly employ people and whose wage bill for a six-month period is below a certain limit set each year (€8,346 in 2018) is an occasional employer.
An occasional employer does not have to sign an insurance contract. Instead, they pay the insurance contributions to a pension insurance company of their choice by the 20th in the month after the wage was paid. It is possible to post the insurance contributions to many of the pension insurance companies online.
An occasional employer pays a fixed contribution under the Employees Pensions Act. In 2018, the contribution of an occasional employer is 25.3% (including the employee’s share of the contribution).