The five most common mistakes employers make when administering occupational pensions and insurance
Occupational pension administration is a complex area that requires accuracy and structure. Administrative errors can have serious consequences for both employers and employees. Despite this, many employers make mistakes that could be avoided with sound administrative procedures and knowledge. Here, we look at the five most common mistakes FörsäkringsGirot sees employers make in occupational pension administration.
- Incorrectly reported pensionable pay (PGL)
To ensure employees receive the correct pension, it is important to report the correct pay to organisations such as Collectum, Fora, insurance companies and advisers. It is important to remember that more than just basic pay must be reported: all pensionable earnings must be declared. The general rule is that pay and pay supplements are pensionable, while expense reimbursements are not. To avoid errors, it is also important to report pensionable pay every month, as it affects both accurate pension calculations and employees’ insurance cover. - Incorrect or late payments
Paying the wrong amount into an occupational pension is another common mistake. This may be due to inadequate administrative procedures, incorrect pay details, calculation errors, a lack of knowledge or misunderstandings about the terms of agreements. Many employers today have ITP1 but may not consider that other agreements can also determine the level of an employee’s occupational pension. One example is sector-specific agreements. This requires employers to have in-depth knowledge of the rules governing collective agreements. For example, the payroll system must be configured correctly at sector-agreement level to ensure each individual receives the correct occupational pension contribution. We know from experience that this is complex to keep track of.
Incorrect payments can lead to employees receiving a lower pension than they are entitled to, which can result in legal problems for the employer and costly compensation claims. Late payments can mean employees miss out on growth in their pension savings and lead to dissatisfaction. A quality-assured monthly process and checks supported by clear procedures are essential to ensure correct payments are made on time. - Employees have incorrect insurance cover
Employee insurance is part of the Swedish model and often forms part of the employment contract between the employee and the employer, whether or not the workplace has a collective agreement. In addition to the agreed insurance cover, statutory insurance provides employees with financial security in the event of illness or an occupational injury, for example. The cost of insurance paid for by the employer is often a certain percentage of employees’ pay. Different types of insurance also have different percentage rates, which can vary from year to year, as well as fees. If the employer pays the wrong amount, employees may not receive compensation in line with the insurance cover actually agreed, which can in turn have devastating consequences. Research by FörsäkringsGirot shows that 1 in 5 employees in Sweden risks having incorrect insurance cover, demonstrating the complexity of the administration required. - Misinterpreting agreements with employees (collective/non-collective agreements)
Depending on whether you as an employer have a collective agreement (for example, ITP or Fora), it can sometimes be difficult to translate the agreement into what is included in the commitment to employees and the remuneration promised. Different collective agreements also vary. If agreements are not interpreted correctly, this can result in incorrect calculations, incorrect pension premiums and a lack of insurance cover. For example, what applies during parental leave or study leave, or if an employee falls ill? Other examples of factors that may vary between agreements include:- Bonus
- On-call pay
- Pay during the notice period
- Commission
- Travel time pay
- Payment in lieu of holiday, holiday pay supplement and holiday pay
- Overtime pay
- Failure to update employee details
Another common oversight is failing to update employee details in time. This may involve changes in pay, working hours as a proportion of full-time hours, or other relevant factors that affect occupational pensions or insurance cover. If these changes are not recorded correctly, this can lead to incorrect payments and complications for both the employer and the employee. Having an effective process for updating employee details on time is essential for accurate occupational pension administration.
In summary
Occupational pension administration can be challenging and complex when it comes to calculations, interpreting agreements and ensuring ongoing accuracy. Ultimately, it is about doing right by your employees and avoiding errors in the administration of occupational pensions and insurance. By being aware of the most common mistakes, you as an employer can take steps to avoid them and ensure the process runs smoothly.
FörsäkringsGirot has extensive experience and expertise in administering occupational pensions and insurance. We support employers who want either to manage the administration themselves or to delegate the work to us.
Would you like to learn more about the risks and challenges of occupational pension administration?
Listen to an insightful and informative discussion about the challenges and risks of occupational pension administration.
