Company Pension Scheme: Working time accounts

Unfortunately, the use of working time accounts is still far from being a standard practice in German companies, although the legal framework and the effects in terms of tax and social security law, and ultimately, in human resources management have now been made very clear and manageable.

There are many reasons for this. Based on our experience in management consulting, companies often fear that this will limit workforce availability, that administering the model will be complicated and that the shortage of skilled workers will stand in the way of the use of such a model.

Practical experience with working time accounts

In fact, what is interesting is that we have had the opposite experience in various large corporations, where the correspondingly large workforce allows us to make a reasonably reliable statement about the effects of working time models. The fear that working time accounts would lead to a reduction in the workforce hired for the company via employment contracts is therefore unfounded. In fact, the opposite is what actually occurs, because the driver for the reduction in the workforce is the inability to work.

The effects of illness

The incapacity to work has a serious impact on a company's costs and added value. These effects essentially result from the continued payment of wages in the event of illness, the costs of continuing to pay wages, the value not created by sick employees and the burden this places on the employees who are able to work.

  • The continued payment of wages is the most measurable factor. According to the Institute of the German Economy, the costs for employers in Germany (which are not only due to the increase in salaries and social security contributions) have risen from €37.6 billion in 2010 to €77.7 billion in 2021. Of the €77.7 billion, €64.6 billion is attributable exclusively to the continued payment of wages and €13 billion is attributable to social security contributions.
  • However, it is more difficult to measure the added value which is not created by employees who are ill. Profitability is a suitable indicator, but this varies depending on the industry. How much individual employees have to earn for their work to be considered profitable varies from industry to industry - the rule of thumb here is: in the service industry, around 200% of the staff costs paid by the employer must be earned per employee per year. The same rule applies to manufacturing, trading and craft businesses, although in this case, the costs of materials or goods consumed must also be included. A distinction must also be made between technical staff, whose absence cannot be made up for, and administrative staff, who may be able to catch up on their tasks after returning to work. If one uses a conservative 150% ratio to calculate the generation of staff costs and restricts this to salary and social security contributions only, then the added value is already reduced by €77.7 billion x 1.5 = €116.55 billion.
  • What is most difficult to measure, however, is the reduction in added value caused by staff who are not ill, but who are also affected by sick leave. The susceptibility to illness also increases in this case, but during periods when employees are able to work, they cannot perform their tasks as effectively, and will only be able to do so with effort and training through repeated communication. This particularly affects efficiently managed companies, where any disruption in processes can have a lasting negative impact. However, experts agree that the reduction in added value entails the greatest costs and that this has an impact across companies along the entire value chain. This means that the amount in 2021 is expected to exceed €116.55 billion.

Overall, the German economy has suffered a reduction in the workforce with an impact above the sum of these cost blocks in the amount of €310.8 billion.

The connection between working time accounts and health

Due to the considerable leverage, however, a significant observation has been made in large corporations with working time account models. In the 2019-2021 survey period, a large telecommunications group made the statistically proven observation that employees who participate in a working time account model are sick on average 1.6 days less per year compared to employees who do not participate in a working time account model (7.4 days on average compared to 9 days on average). This means that, out of the company’s total workforce, employees who participated in a working time account had 23,851 more days per year at their disposal than employees who did not participate in a working time account. There were more sick days in areas with a lot of customer contact and lower salary levels. The working time account had a greater impact in areas where there were many sick days, a lot of overtime and a large number of participants in the working time account model.

These observations reveal a significant correlation between the use of working time accounts and health. There is a clear gain in workforce capacity and added value when participating in a working time account model.

Advantages in the "war for talent"

Apart from the fact that offering a working time account model is already considered to be a necessity when competing for skilled workers, it also makes it possible to improve workforce capacity and add value, including beyond any fear of losses that might result from the use of the working time account model. The working time account model allows employees to relax and take a break during their sabbatical, the opportunity to achieve and realize their life goals and thus also to increase their resilience and perceived happiness and satisfaction. The legal framework of the working time account model offers an entitlement structure for the accumulation and use of the credit balance and thus creates security, effectiveness and appreciation. The specialist literature also considers these factors to be conducive to creating added value for companies.

As a result, the reservations and fears that companies have when first considering adopting working time account models can be effectively addressed and this type of model can create a working environment that attracts skilled workers, motivates them to stay with the company and also creates added value.

adesso has many years of experience in the consultation, implementation and the secure and cost-effective operation of these models, from the time that the legal requirements were first established. addesso has implemented digitization in order to offer a high degree of automation of administrative processes. We are at your disposal to offer consultation and administrative services to increase the attractiveness and added value of your company with our in-depth practical knowledge.

Would you like to learn more about this topic? Feel free to contact our expert, Jens Gustenhoven, Senior Business Developer at adesso insurance solutions.

Do you have any questions or comments? Then please leave us a comment.

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