The ideal way to reward your staff: group insurance - AG Employee Benefits

Published on 31/05/2018


The ideal way to reward your staff: group insurance


If you’re looking to incentivise your staff while maximising tax efficiencies, a bonus plan is one of the most attractive reward solutions.      

Favourable tax treatment

When choosing from among the different possible reward solutions, the tax efficiency of group insurance (1) is an important consideration. A group insurance plan works out to be the best alternative for both the employer and the employee.

For the employer, the cost of a bonus plan will be lower than other reward solutions.

For the employee, the net cash in hand will be higher than with other reward solutions:

    • The employee will end up with roughly 73-74% of the initial bonus awarded by the employer which can then be invested in a group insurance plan, whereas with a traditional cash bonus, the net take-away would only be around 30%.

A bonus plan is also an integral part of a flexible remuneration policy that you can tailor to fit your company culture and vision:

All types of performance bonuses, year-end bonuses and other rewards can be fully or partially integrated in a bonus plan

A bonus plan can transform an existing bonus system or serve to create a new pay structure

A bonus plan can be set up for specific categories of employees

Payments into a bonus plan can be allocated differently according to age and/or years of service (e.g. a small part of the premium for younger staff members vs a bigger part for older staff members)

A flexible investment vehicle

A group insurance plan is also a flexible investment vehicle as there are different investment opportunities to choose from.

A Branch 21 investment offers the security of an insurer-guaranteed return. Regardless of investment performance, AG Insurance is bound by a performance obligation over the long term.
On top of the guaranteed return, the insurer may also award profit sharing.  The profit sharing is not guaranteed, and the amount may vary from year to year.

A Branch 23 investment will earn a return that will vary depending on performance of the selected fund(s).

The suitability of these options will depend on your risk profile. Your contact person at AG Employee Benefits will be happy to assist you in choosing the best investment vehicle for your company.

Due to favourable 2nd pillar tax treatment, a bonus plan is a better alternative than other reward solutions for both the employer and the employee.

Homeowner dreams

Another little known advantage of group insurance is the option for plan participants to take out a cash advance on their accrued pension reserves. Many staff members could greatly benefit from this option depending on their family needs and where they are in their career.

In the current economic environment, access to a cash advance will particularly appeal to candidates looking to get on the property ladder. The advance can be applied to buy, build or remodel real estate located in the European Economic Area.

There are three different types of advances:

  1. advance with no annual interest payments
  2. advance with fixed annual interest payments
  3. advance with variable annual interest payments

For the third option, the interest rate has been revised downwards, from 1.95% to 1.25%, effective 1 January 2018.

Find out more about bonus plans and the tax benefits of group insurance.

Find out more about cash advances.

For more information, contact your regular representative at AG Employee Benefits.