Right to salary sacrifice

The Pensions Reform gives employees a right to salary sacrifice which is enshrined in law for the first time. The employee can ask to have part of his salary (max. 4% of the income threshold for statutory pensions insurance) used for his occupational pension through salary sacrifice. Where an occupational pension financed by salary sacrifice is in place already, the employee’s right to salary sacrifice is excluded.

Where the entitlement to salary sacrifice for an occupational pension exists, the employee can request that the criteria for state incentives are met. If the employer is offering implementation via a Pension fund or staff pension sheme, the occupational pension provisioning should be carried out through such schemes. Otherwise, the employee can request that a direct insurance policy is taken out.

One restriction does apply, however: the entitlement can only be enforced in relation to collective wage arrangements if the collective wage agreement provides for or permits salary sacrifice (“tariff precedence”).