Why would an employer pay all social premiums, including the employee’s share?
Social premiums are payments for things like pension and health insurance. Usually the employer and the employee each pay a share. Some employers choose to pay both shares. There are two common reasons.
1. It was agreed during salary talks
- Sometimes an employee asks for this as an extra benefit when negotiating their salary.
- Employees can only ask for it if they know it’s an option, so it helps to mention it.
2. It saves money when the employer promises a net salary
A net salary agreement means the employer promises a fixed amount after deductions. The employer then has to work backwards to find the gross salary (the amount before deductions).
- If the employee’s share of social premiums comes out of their pay, the employer has to raise the gross salary to cover it.
- If the employer pays that share directly, nothing comes out of the employee’s pay. The gross salary can then be lower and closer to the net salary.
- A lower gross salary also means lower social premiums overall, because premiums are based on the gross salary.
The result: the employee gets the same net pay. The employer may save several thousand in wage costs per employee each year.