Servus #19

February 2024

Table of Contents

• Current developments in the statutory pension insurance
• Case law: Part-time employment and company pension schemes
• Under the magnifying glass: Work-life-love balance
• Mobility budget: the future of employee mobility
• From HR practice: the A1 certificate
• Parental allowance limit decided

Current developments in the statutory pension insurance

As reported several times in Servus, the governing coalition has put comprehensive pension reforms on its agenda: stabilization of statutory pension insurance, promotion of private pensions in general and Riester pensions in particular, improvements to the framework conditions for company pensions (keyword “social partner model”) – in fact, there is no area that should not be reviewed and modernized.

A key point of criticism in all concepts and proposals was repeatedly the so-called “Nahles-Pension” introduced in 2014. This is not a standalone pension, but the option of drawing the statutory retirement pension early and without deductions. This is possible regardless of the statutory retirement age once 45 years of insurance have been reached. Anyone with at least 35 years of insurance can also retire early, but with deductions (0.3% for each month of early retirement). The term “retirement at 63” has also become commonplace, even if this is no longer entirely accurate, as the gradual increase in the standard retirement age from 65 to 67 means that the retirement age for this type of pension is currently 64 years and 4 months and will rise to 65 by 2029.

When the “Nahles-Pension” was introduced, around 200,000 applicants were predicted each year. This figure has even been exceeded, totaling around 2.3 million users since its introduction. Not only are the associated costs and additional burdens on the state pension fund considerable, but also the question of why, in times of a shortage of skilled labor, such incentives for early retirement are being set – even though the retirement age should be raised. There is therefore cross-party support for abolishing the Nahles-Pension.

Case law: part-time employment and company pension schemes

The appropriate consideration of part-time employment in the calculation of pension entitlements is regularly the subject of supreme court rulings. The Federal Labor Court recently had another opportunity to deal with this issue (BAG, judgement of 20 June 2023, case no. 3 AZR 221/22).

The case concerned a company pension scheme in which the amount of monthly retirement pension benefit depends on the length of service and income in the last year before retirement. The regulation stipulates that in the case of part-time employment, the average working hours of the last ten years prior to retirement must be considered.

The plaintiff did not agree with this 10-year assessment. She argued that the period of her part-time employment should be set in relation to the total eligible period of service, and not just that of the last ten years before leaving the company. Considering the level of employment only for the last ten years would constitute an unjustified disadvantage due to her part-time employment. This would result in significantly higher average weekly working hours for her if her entire period of service were considered.

The court ruled that in the case of so-called final salary-related pension commitments, the company pension scheme represents a reward for loyalty to the company, considering the pension requirements. A part-time factor does not have to relate to the entire duration of the employment relationship. It justified this by stating that even if there was an indirect disadvantage due to part-time work, this was in any case justified. This is because in the case of final salary-related pension commitments, the last salary received is an objective criterion. The pro rata temporis principle therefore does not require the employment factor to be considered for the entire employment relationship.

Under the magnifying glass: Work-life-love balance

The importance of a successful work-life balance for employees, companies and society is now undisputed, even in Germany. Those who manage to devote time, energy and attention to their professional responsibilities and private commitments without overextending themselves are less stressed and have more personal resources. This enables individuals to maintain healthy relationships and thus promote their own development and fulfilment. The view of people as social beings who cultivate healthy relationships (love) both at work and in their private lives thus expands the concept of work-life balance to work-life-love balance.

With or without the relationship aspect: inner balance is individual. In addition, the increasing technologization and flexibilization of work is promoting a greater blurring of the boundaries between work and private life (work-life blending). So how can employees be helped to harmonize their work-life-love balance? We believe that two basic assumptions are crucial when selecting company measures. Firstly, the understanding that the professional role is only one of many social roles in the everyday life of employees and that the fulfillment of the most important ones should be made possible as far as possible. For example, the employee is not only a manager, but also a family person, holds an honorary position and is active in sports. Accordingly, the allocation of time and energy is not about sticking to a rigid plan and a fixed location, but about favoring mutual flexibility and adaptability in dealing with the three aspects of work – life – relationship.

Mobility budget: the future of employee mobility

A mobility budget is a financial allowance that employees receive from their employers to organize their individual mobility. Unlike traditional company car schemes, the mobility budget enables a wider range of mobility services, including public transport, bicycle leasing, car sharing, but also the use of travel services such as Uber. Depending on the provider, costs for vehicle servicing, repairs and accessories, petrol costs and even trips abroad can also be billed via the budget.

For companies, the mobility budget offers a flexible alternative to traditional company car arrangements and helps to minimize administrative costs. In addition, a mobility budget can help to reduce CO2 emissions and promote sustainability within the company by supporting alternative and environmentally friendly forms of mobility (e.g. electric cars and bicycles). For employees, the mobility budget means greater flexibility and autonomy in choosing their means of transport. Instead of being tied to a specific company car, they can choose between different mobility services depending on their needs and personal preferences. This not only increases employee satisfaction but can also contribute to a better work-life balance.

From HR practice: the A1 certificate

The A1 certificate, an important, albeit small detail of European HR work, is becoming increasingly important thanks to growing employee mobility. Employees use it to prove that they are covered by social security in their home country. Without this proof, employees are generally subject to the legal provisions applicable abroad (territorial principle). In concrete terms, this can mean that additional social security payments have to be made. In countries where proof is subject to the obligation to register under labor law, there is even a risk of fines. Checks are carried out by the financial police of the respective countries and can take place at railway stations, airports, trade fairs and conferences, among other places.

Employers with employees who are temporarily working across borders should therefore apply for the A1 certificate via the health insurance company or pension provider at an early stage and forward it to their employees. Even if a subsequent application is possible in individual cases, we advise against this and recommend applying at least two weeks before the start of the business trip.

In addition to the classic business trip, workation (Servus 09/23), if it is carried out abroad, is also considered a temporary cross-border assignment and requires an A1 certificate.

The application is made via the SV-Meldeportal, formerly sv.net (Servus 10/23). The reporting obligations to be fulfilled via the SV-Meldeportal can be transferred to third-party providers.

Parental allowance limit decided

We had already explained the draft law in the Servus Newsletter #18 in December 2023, now it is a done deal: the income limit for parental allowance will decrease significantly from April 1st of this year.

Currently, according to the Federal Parental Allowance and Parental Leave Act (BEEG), parents with a taxable income of less than 300,000 euros in the year before the birth of their child, receive parental allowance. For single parents it must be less than 250,000 euros. From April 1st, 2024, couples with a taxable annual income of over 200,000 euros will no longer receive parental allowance. One year later, from April 1st, 2025, the limit will drop again to 175,000 euros. The previous limit of 250,000 euros should continue to apply to single parents.

Furthermore, the possibility for both parents to receive parental allowance at the same time has been revised. In the future, it will only be possible to receive parental allowance for a maximum of one month simultaneously up to the child’s first birthday. There are exceptions to the parallel receipt of Parental Allowance Plus, the partnership bonus and in the case of multiple births and premature babies.

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