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Incentives and motivation: why companies take out accumulative corporate insurance

Ekaterina Zastolskaya. Photo:

An advanced benefit package helps a company retain a valuable employee and deal with unwanted turnover. It can include corporate or pension insurance. Such programs motivate key employees with additional payments, and for the company they are more efficient tools in terms of taxation than ordinary bonuses.

Director of JLLC “Priorlife” Yekaterina Zastolskaya and head of sales and business development department Anton Gurinovich told how corporate insurance for employees can be useful, and calculated the amount of contributions and benefits that a business receives, using specific examples.

Anton Gurinovich.  Photo: company archive
Anton Gurinovich. Photo: company archive

– The main opportunities offered by corporate insurance for companies:

1. Optimize labor costs: pay bonuses to employees, do not “overpay” those who quit within a year, pay more to loyal employees.

2. Build medium and long term employee motivation to retain valuable talent.

3. To carry out the indexation of salaries through “deferred payment”.

4. Create and / or expand a social package for employees and their families.

5. Financially help the employee’s family in the event of a tragic situation.

What tax benefits does corporate insurance provide:

  • You do not need to pay 34% of the payments to the FSZN
  • Income tax on contributions (13%) is not charged if the amount is within 3890 rubles. per year per employee
  • Insurance costs are attributed to the prime cost (within 12% of the payroll and no more than 1 min salary per employee (today this figure is 400 rubles).

Usually, endowment life insurance programs are introduced for employees who have been with the company for more than 3 years. The amount of contributions and the sum insured can be determined depending on the “group” of employees and work experience. The frequency of contributions can be chosen – monthly, quarterly or annually. The company can add or remove an employee from the list – for example, in case of dismissal.

Ekaterina Zastolskaya.  Photo:
Ekaterina Zastolskaya. Photo:

The peculiarity of accumulative insurance is that the amount of contributions is always returned, and together with interest: the employee receives the accumulated amount at the end of the insurance contract, or the insurance company makes payments to his heirs.

What then is the interest of the insurance company? The insurance company invests the money received from the premiums under the contracts at its own discretion and thus generates income. Previously, insurance reserves could only be invested “within the country”. Since October 2020, it is also allowed to purchase bonds of Group A countries (for example, Austria, the United States), but insurance companies are still looking closely and determine which will be more profitable.

What programs are there and how they work

1. Annual program. It is usually chosen by companies that want to get acquainted with the possibilities of insurance. An organization can use such a program as additional motivation. Also, such a program can be a substitute for medical insurance, which can be spent not only on services with doctors.

Photo: company archive
Photo: company archive

2. Three- and five-year programs. Typically used by companies to “retain” and reward valuable employees, as people are motivated to work for the company until they are paid. The agreement can be concluded pegged to the dollar or euro exchange rate in order to reduce risks, however, settlements will be carried out in Belarusian rubles. The amount of premiums can be changed during the insurance period. In addition, the amounts can be individually approved for each employee.

Example. The company has a valuable employee – a 35-year-old girl who the company wants to motivate to continue working in the long term. For these purposes, $ 130 per month is allocated. What options does the company have:

  • Pay the employee a bonus at the end of the year. Then, to pay her $ 4680 over three years, you will have to spend $ 7113 ($ 4680 + $ 1591 (FSZN) + $ 842 (income tax)). In addition, income tax (13%) will be withheld from the employee – i.e. another $ 608. As a result, the employee will receive $ 4072
  • Take advantage of the insurance program. Then the company will spend exactly $ 4680, since it will not pay to the Federal Tax Service and income tax. This is 51% more effective for the company than bonuses at the end of the year. In this case, the employee will receive $ 4497 ​​in his hands.

The bottom line. With the help of corporate endowment insurance, you can save $ 2,434 on bonuses for each employee based on the results of three years. If the company plans to reward 20 people through the corporate insurance program, then the company will save $ 48,680 over 3 years. In this case, two goals are achieved at once: motivation of the employee for fruitful work for a long period and financial benefit for both parties.

Ekaterina Zastolskaya.  Photo:
Ekaterina Zastolskaya. Photo:

3. Pension program. Helps the company to form a talent pool. Over the years of work in the company, the employee “accumulates” a decent amount, which keeps him from being fired and leaving for competitors. And at the expense of those who did quit, it is possible to increase payments to those who remained loyal.

Example. The company has been working for more than 5 years a valuable specialist – a man of 40 years. The organization wants to retain such an employee and therefore motivates him financially. What options does the company have:

  • Pay premiums periodically. The company will spend $ 28,610 to get the employee only $ 18,575 ($ 7259 – deductions to the Federal Social Security Fund, another $ 2776 – income tax)
  • Make pension insurance contributions for the employee. By the time the employee retires, the insurance amount will be $ 36,000. With a lump sum payment, the employee will receive $ 28,165. And if you receive payments monthly, the employee will be able to have an additional $ 300 for 10 years.

If the employee nevertheless decided to quit, then the organization may terminate the contract ahead of schedule.

How to set the amount of contributions for employees

The company’s management can independently determine what amounts to deduct for insurance of each of the employees. Often it all depends on how valuable the specialist is for the company, how much profit he brings to it, how long he works in the organization, etc.

Photo: company archive
Photo: company archive

How can it be? You can fix deductions depending on the length of service of employees in specific groups. The amount of the insurance premium can be determined as a percentage of the average monthly salary:

Work experience

Monthly insurance premium
of the average monthly salary,%

Group 1Group 2
3-5 years old3%5.5%
5-9 years oldfour%
9 to 12 years old5.5%7%
12 to 15 years old7%8.5%
15+ years old14%15%

You can also determine a fixed amount that an employee will receive at the end of the year, and write it down in the contract:

Work experienceSum insured in average monthly wages
Group 1Group 2
3-5 years oldone2
5-9 years old1.5
9 to 12 years old22.5
12 to 15 years old2.53
From 15 years old and more33.5

What else is important to consider

Life insurance includes the risk of an employee’s death… This means that when insuring a man and a woman of the same age for the same amount, the man will receive a lower sum insured as a result. According to statistics, life expectancy in men is shorter, so their risk of dying is higher. Also, tariffs will be more profitable for young people – again due to lower risks.

Ekaterina Zastolskaya.  Photo:
Ekaterina Zastolskaya. Photo:

Quarterly contributions are more profitable than monthly fees, and annual fees are more profitable than quarterly… The rate rises depending on how much the company makes contributions during the term of the insurance contract.

Pension insurance provides more savings than life insurance, since it does not include the risk of death of an employee at the accumulation stage.

No.Full nameFloorThe amount of contributions per year in $ (at the rate of the NBRB)Sum insured (with monthly installments)Sum insured (for quarterly installments)Sum insured (with annual premiums)
oneIvanov Ivan Ivanovich, 20 yearsM1,200345934683 508
2Petrov Petr Petrovich, 40 yearsM1,200342734383485
3Ivanova Olga Ivanovna, 20 yearsF1,200346534743513
fourPetrova Olga Ivanovna, 40 yearsF1,200345634653 506

Let’s summarize

Corporate insurance is an opportunity to encourage and motivate employees, give them an additional pension, and help the employee’s family in the event of a tragedy. A wide social package with an insurance policy makes the company more attractive to candidates when hiring and becomes a significant factor in retaining valuable personnel.

Endowment insurance is becoming an effective incentive system. And the availability of tax incentives makes it even more attractive for business.

If tragic events occur and the employee passes away, the company will be able to support his family and provide insurance payments to relatives.

The link can be used to download a “calculator” for calculations for life insurance of employees in Excel format.

Fidenge Pecold

My profession is a journalist, but my hobby for 8 years has been studying Forex investing and trading. During this time, I managed to gain extensive experience in investing and trading cryptocurrencies and double my capital in the Forex market. To be the author of this magazine, the site owners invited me to participate in one of the 2020 trading webinars, and I will try to reveal the most relevant crypto market news for you.

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