Salary Exchange Plan enhances financial wellbeing

March 2022

An employee’s financial wellbeing can have a substantial impact on mental health. Employers play a key role in helping their employees plan financially for the future. A Salary Exchange program offers benefits for both the employer as well as the employee. 

Due to the relative decreasing level of the state pension in Sweden¹, the high tax burden on income and the fact that private pension contributions are no longer tax deductible since 2016, the importance of occupational pensions has become even more significant, particularly for higher salary levels. Despite existing occupational pension contributions, many employees are still not confident with the level of the forecasted pension.  

In order to strengthen the pension level, many employers, especially multinational corporations, now offer a Salary Exchange program to their employees in Sweden. This applies to both employers with and without a collective agreement.  Employees are also showing an increased interest in the possibility to exchange part of their salary for extra pension contributions.  

Salary Exchange is a benefit that means that an employee reduces part of their salary in return for an increased payment to the occupational pension. Due to the tax rules, the employer can also pay a little more into the pension than the amount that the employee chooses to change salaries. 

The special payroll tax on pension premiums is approximately 6 percent lower than the employer's contribution to paid salary.  This means that you as an employer can offer an attractive salary benefit by adding an extra 6% on top, without any added cost to the company.  An employee who exchanges a salary of SEK 1,000 can thus receive SEK 1,060 in pension premiums: a win/win.

In recent years, Salary Exchange has become a more attractive benefit that employees truly value.

It is important that the employee's gross salary after the salary exchange is not lower than SEK 572,970 (8.07 income base amount in 2022). This corresponds to a monthly salary of SEK 47,748 (app. USD 5,125).

A gross salary below this level would have a negative impact on the general pension. If the salary becomes even lower, sickness benefits, parental benefits and other social insurance benefits can also be affected.

To ease the administration of a Salary Exchange program, SPP offers a unique Salary Exchange Service that helps you as an employer - quick, digital and correct. Discuss the possibility of including the Salary Exchange in your IGP account with your IGP Account Manager.  Salary Exchange typically includes supplementary long-term disability (LTD) and waiver of premium (WOP) benefits.

Since 2007, SPP is a part of the Norwegian Storebrand Group.  Together, they are a leading player in the Nordic market for long-term savings and insurance.  SPP offers a complete range of life insurance products for occupational and private pensions, with an extra focus on products and services for Swedish multinationals and to subsidiaries setting up in Sweden. SPP works both direct and via local brokers. 

In 2022, Storebrand/SPP were ranked the world’s most sustainable insurance group and one of the world’s Top 100 Most Sustainable Corporations. In 2021, SPP ranked Number 1 on EYs SHE Index. The SHE Index measures and compares the gender balance in organizations, fostering transparency and motivating action.

SPP has been an IGP Network Partner since 2000.