In agreement with their employer, employees subject to the ‘old’ severance pay scheme have the option of agreeing transition (partial or total) to the new provision scheme.
Any such transition is based on an individual agreement between employer and employee. Framework conditions applicable to such a transition can be laid down in a works agreement (e.g. percentages of the sums involved in a full transition)
As of the moment of transition – be it full or partial – the employer pays 1.53 % of the employee’s gross monthly earnings into the corporate staff provision fund.
In the event of full transition, you change over entirely from the ‘old’ retirement provision fund to the corporate provision fund. Any accrued entitlement capital resulting from the old severance pay scheme will be transferred by your employer to the corporate staff provision fund in the shape of a transfer sum. This is not a statutory amount but subject to a negotiated agreement. As of the moment of full transition, all employee entitlements are subject to the statutory regulations governing the new severance pay scheme.
Advantages for the employer
- Tax savings: Transfer sums and contributions count as business expenses.
- Reduced risks: Facilitated financial planning on account of regular contributions and prevention of potential financial bottlenecks due to employee retirement.
- Simplified annual accounts and organisation: no more need to set up provisions, and time or cost savings through a uniform severance pay scheme for all employees.
Advantages for employees
- Gross capital guarantee on all contributions as well as capital gains tax exempt investment.
- New severance pay scheme contributions are made on a monthly basis and hence are independent of any previous income.
With partial transition, the entitlement capital gained from the ‘old’ provision scheme remains untouched. Thus, any entitlements accrued so far remain subject to the statutory regulations of the ‘old’ provision scheme. From the effective date, contributions are paid into the corporate staff provision fund.