Co-investing with employees in the company pension plan: cut turnover during the 1st and 2nd year

A 280-employee tech services company cut turnover from 18% to 8% in the critical 12-24 month window thanks to an Employment Pension Plan with tiered matching contributions. Result: €222,120 of net annual benefit.

Talent turnover in the 12 to 24 month window is one of the most expensive —and most invisible— bleeds on the P&L. In this success case we show how co-investing with employees in their company pension plan turns a traditional retention policy into a financial lever with measurable ROI.

1. Client context

• Sector: Technology Services.
• Headcount: 280 employees.
• Average salary: €29,000 gross per year.
• Main problem: Annual turnover rate of 18% concentrated in the 12 to 24 month tenure window. Competitors poached talent by offering net salary raises of just €1,000 to €1,500 per year.
• Cost of the problem: Each departure had a P&L impact of €15,980 (learning curve, operational vacancy and recruitment costs). Estimated total annual leakage: ~€800,000.

2. The solution implemented

The retention policy based on pure salary raises —inefficient because of income tax— was replaced with an Employment Pension Plan with Tiered Matching Contributions.

A two-phase co-investment program was designed to directly attack the critical leakage window (18-24 months):

• Phase 1 (months 1 to 12): For the €10 the employee contributes monthly, the company contributes €20.
• Phase 2 (months 13 to 24): If the employee raises their payroll contribution to €15, the company raises to €30.

3. Foundations of the turnover reduction

The model worked by leaning on three key levers that were aggressively communicated to the workforce:

• The tax shield (income tax): Employees were shown that €1,000 of a salary raise became €700 net, while in the plan it went in whole and started generating returns from day one.
• The effort multiplier (skin in the game): By month 24, the employee had made an effort of €10 every month they barely noticed, but saw almost €1,000 accumulated in their account thanks to the company contribution and returns.
• Loss aversion: By the second year, leaving the company meant giving up a system that multiplied their saving capacity by 5. For an employee to accept an external offer, competitors had to offer disproportionate signing bonuses.

4. Tracking metrics (KPIs)

To prove ROI to the CFO, we set three key KPIs audited quarterly:

• Take-up rate: Percentage of the workforce that decides to give up part of their payroll to activate the company contribution. Measures the real attractiveness of the benefit.
• 24-month survival: Percentage of employees enrolled in the plan that pass the critical two-year barrier vs. those not enrolled. Isolates the plan's effect on turnover.
• Net replacement savings: (Number of avoided exits × €15,980) − Total cost of company contributions. Proves the plan is a savings center, not a cost center.

5. Results after 24 months of implementation

After two years of plan maturation, the audit produced the following empirical data:

• High adoption: 65% of the workforce (182 employees) joined the co-investment plan, proving that the tiered "free money" model breaks the age barrier and the initial lack of interest in long-term saving.
• Turnover collapse: Turnover in the group enrolled in the plan dropped from the historical 18% to 8%.

Annualized return on investment (Financial ROI)

• Retaining that extra 10% of workforce (18 employees saved per year) avoided replacement and productivity costs of €287,640 (18 avoided exits × €15,980).
• The company's maximum investment in contributions for the 182 enrolled during that year was €65,520 (182 employees × €360 annually in Phase 2).
• Net benefit for the company: more than €222,120 in real savings in the year, plus a more experienced and consolidated team.

Conclusion

Co-investing with the team in their company pension plan is not a perk expense: it is the most profitable retention tool for a company with turnover concentrated in the first two years. Tiered matching turns every euro contributed by the company into a tenure multiplier, neutralizes external offers and frees up budget that used to evaporate into replacements.

At Arca Digital we design and implement this type of employment pension plans with the technology, tax expertise and support needed to make ROI not a promise, but an auditable metric every quarter.