Average company contribution to retirement plans is the average amount an employer pays into its employees' retirement savings accounts, for example a 401(k) plan in the United States or a workplace pension elsewhere, over a period such as a year. It shows how much the company invests in its employees' long-term financial security and is a key benchmark for the competitiveness of a benefits package.
The figure depends on two things: how generous the plan design is (the match or fixed contribution) and how many employees actually take part. That is why it is usually tracked with the participation rate in retirement plans.
How to calculate average company contribution
Example: a company with 250 employees paid $750,000 into retirement accounts last year. The average company contribution is 750,000 / 250 = $3,000 per employee.
Decide which denominator you use and keep it consistent. Dividing by all employees shows the cost per head; dividing by participating employees shows how much a participant typically receives. It is also common to express the contribution as a percentage of payroll, which makes it comparable between companies with different pay levels.
How contributions are structured
- Matching contribution: the employer adds money in proportion to what the employee saves, up to a limit, for example 50% of what the employee contributes up to 6% of pay.
- Non-elective (fixed) contribution: the employer contributes a set percentage of pay for every eligible employee, whether or not they save themselves.
- Vesting: employer contributions may become the employee's property gradually over a period of service, which also works as a retention incentive.
Contribution limits and rules depend on the plan type and the country; in the US they are set by federal law and IRS limits.
Participation rate in retirement plans
The participation rate in retirement plans is the share of eligible employees who actually contribute to the company plan:
Example: 180 of 220 eligible employees contribute, so the participation rate is 180 / 220 × 100 ≈ 82%.
With a matching plan, low participation also lowers the average company contribution, because employees who do not save do not receive the match. A low rate often means employees do not understand the plan, cannot afford to save, or find enrolment too complicated. It is worth breaking the rate down by age, pay level and location to see who is not participating.
How to increase participation
- Automatic enrolment: new employees are enrolled by default with the option to opt out. This is one of the most effective ways to raise participation.
- An employer match that is easy to understand.
- Simple choices: a sensible default investment and fewer options.
- Education: short sessions and clear explanations at onboarding and at enrolment time.
- Easy enrolment through a self-service portal.
Using the two metrics together
| Average contribution | Participation | Likely situation |
|---|---|---|
| Low | Low | Employees are not using the match; start with enrolment and education |
| Low | High | Plan design is modest; compare the match with the market |
| High | Low | Benefits concentrated in a few, often higher-paid, employees |
| High | High | Plan is valued and used |
Both metrics feed the wider view of employee benefits and their return on investment.
How it works in Skailer
In Skailer, HR can record an employer pension contribution as an employer contribution component in each employee's compensation package, with its own amount, period and currency. Employer contributions count toward the total cost of employment, which the profile and the Salary report show. See compensation management.
How is average company contribution to retirement plans calculated?
Divide total employer contributions in a period by the number of employees, or by the number of participants if you want the average per participant.
How is the participation rate in retirement plans calculated?
Divide the number of employees contributing to the plan by the number of eligible employees and multiply by 100.
Why do participation rates matter?
They show whether employees actually use the plan. With a matching plan, low participation also means employees are leaving employer money unused.
How can employers increase participation rates?
Automatic enrolment, a clear employer match, simple investment choices, education at onboarding and enrolment, and easy self-service sign-up.
What is the difference between a matching and a non-elective contribution?
A match depends on how much the employee saves. A non-elective contribution is paid to every eligible employee regardless of their own saving.