Employer Match

Employer matching is a common feature of workplace retirement plans, especially 401(k) plans in the United States, and similar arrangements exist in other countries' workplace pension schemes.

A typical formula might be that the employer matches 50% of employee contributions up to 6% of salary. An employee earning 60,000 who contributes 6%, or 3,600 a year, would receive an additional 1,800 from their employer. If they contributed only 3%, the employer would add 900.

An employer match is often described as free money, because it is an immediate return on the employee's contribution. In the example above, every unit the employee saves, up to the limit, is instantly increased by 50%. For this reason, financial guidance commonly suggests contributing at least enough to receive the full match.

Employer contributions often come with a vesting schedule, meaning the employee must work for the company for a certain period before the matched money becomes fully theirs. Leaving the job early may mean losing some or all of the employer's contributions.

Matching formulas, limits and vesting rules vary between employers and countries.