How do pension contributions affect company finances?

The direct financial impact of pension fund contributions

Pension fund contributions are an integral part of ancillary wage costs. They consist of employee contributions, which are deducted directly from the salary, and the company’s contributions. By law, the employer must finance at least half of the total contributions. This means the company’s total contribution must be at least as high as the sum of the salary deductions of all employees.

However, these contributions are not only used for the insured persons’ retirement savings. They also cover the costs of important risk insurance, which protects employees and their relatives in the event of disability or death. In addition, there are administrative costs. From a financial planning perspective, all contributions made by the company are fully deductible as a business expense and thus reduce the taxable profit.

Here is a calculation example: An SME with a total wage bill of CHF 1.5 million and average contributions of 12% has annual pension fund costs of CHF 180,000. The company must cover at least CHF 90,000 of this amount. This sum is fully deductible from the taxable profit as a personnel expense and directly reduces the tax burden.

More than just costs: A strategic financial tool

A well-planned pension solution is much more than just a cost factor. It is a strategic instrument that significantly influences a company’s financial health and attractiveness.

• Liquidity planning and efficiency: The regular contribution payments represent a fixed outflow of liquidity. Efficient administration is therefore crucial to keep the administrative effort and associated costs as low as possible. Digital portals such as iTellco significantly simplify the management of new hires, departures and salary changes, creating financial predictability.
• Employer attractiveness: A generous and stable pension fund solution is a strong argument in the competition for qualified specialists. It signals appreciation and security, which increases employee retention and reduces long-term recruitment costs.
• Tax optimisation: The tax deductibility of contributions allows the company’s tax burden to be actively managed. Voluntary buy-ins by insured persons or the financing of non-mandatory benefits can also bring tax advantages.

Identifying and correctly managing financial risks

The choice of pension fund also has a direct impact on a company’s financial risk. A potential underfunding represents the greatest risk here. Underfunding occurs when a pension fund’s assets are no longer sufficient to cover its current and future pension obligations. To close this funding gap, the pension fund can levy restructuring contributions – additional payments that must be made by employers and sometimes also by employees. This leads to unforeseen costs that can strain company finances.

As a reliable partner, Tellco pk focuses on transparency and stability to minimise such risks. The choice of investment strategy – whether security- or yield-orientated – should always be aligned with your company’s risk capacity and long-term goals.