Partial retirement

The regulations on partial retirement are intended to create a smooth transition for older employees into retirement and employment opportunities for the unemployed, trained workers and trainees in small companies (up to 50 employees).

The Employment Agency therefore promotes part-time work for older employees if the jobs that become vacant as a result are filled or a trainee is employed.
The advantage for employees is that in the last few years before retirement, they only work half the time for the duration of the part-time working scheme, but their wages are only reduced by around a third. Pension insurance remains virtually unaffected because the employer pays the higher insurance contributions.

Possible models of partial retirement are

• Half-time employment
  Working only half of the previous working hours every day.
• Alternating work and time off
  For example, working one day with the previous working hours and the next day off; the change can also be agreed for weeks or months.
• Block model
  The period from the agreement until retirement is divided into 2 equal blocks of time. The first half of the period is worked at the previously agreed working hours (working phase), followed by time off until retirement (release phase).

ATTENTION:
Regardless of which model is considered by the employee and employer, the employee receives the same salary throughout the period of partial retirement - i.e. until retirement - both for working hours and for the time off.

These employment regulations apply from the time the partial retirement is agreed - regardless of whether the employer receives funding from the employment agency.

the employment agency

The employer submits the following documents to the Employment Agency:

• Application for recognition of the requirements
• Application for reimbursement of benefits
  

Subsidies under the Partial Retirement Act are only granted in cases where the partial retirement employment relationship began before December 31, 2009. It is also legally possible to work part-time after 31.12.2009, as the Partial Retirement Act (according to the current legal status) has not lost its validity since 2009. However, this can then no longer be funded by the Federal Employment Agency (BA).

Before considering a partial retirement employment arrangement, employees should obtain detailed information about their personal insurance history and pension entitlement from the relevant pension insurance provider.

The employee and employer should then discuss the most suitable employment model for both parties. At this stage, the employer can already apply for the employment agency to check the requirements.

The previous weekly working hours are halved by means of a contractual agreement. This is usually done by amending the employment contract accordingly. The agreement must be drafted in such a way that the partial retirement lasts at least until the earliest possible date on which the employee can claim an old-age pension. The pension insurance provider will advise on whether a reduced pension is also possible.

Benefits under the Partial Retirement Act are paid by the relevant employment agency upon written application by the employer. There is a two-stage application procedure at the Employment Agency for claims for reimbursement of benefits to the employer:

Application for recognition of the requirements
In this procedure, the employment agency checks whether the employee and employer meet the requirements for funding.

If the vacant position in the block model is not refilled until the start of the release phase, the employment agency will also decide in advance, at the employer's request, whether the employee belongs to the group of older employees who are eligible.

Application for reimbursement of benefits
If it is certain that the requirements are met and the position will be filled again, a written application must be made for the benefits to be paid.

At the employer's request, the Employment Agency will decide whether the conditions for the provision of benefits are met. The employer is required to have actually filled the required position.

End of partial retirement
Partial retirement ends when the contract expires without the need for notice of termination. After the agreed duration of partial retirement, the pension should be approved. After partial retirement, the employee can then retire directly.

You can find out more about this topic from the following links:

Application for recognition of the requirements

The application for recognition of the prerequisites must be submitted within 3 months of the prerequisites being met, including reappointment. If the application is submitted after this period, it will only take effect from the beginning of the month in which the application is submitted. It is advisable to submit the application early in order to obtain planning security.

Application for reimbursement of benefits

The application for reimbursement of benefits is not subject to any time limit in cases where partial retirement began on or after July 1, 2004. It is valid for the entire period of support. The claim for reimbursement is only subject to a 4-year limitation period.

If partial retirement began before 01.07.2004 and the reimbursement benefits are processed in accordance with the law applicable up to 30.06.2004, the application for reimbursement of benefits is subject to an application period of 6 months. Reimbursement benefits must be applied for within 6 months of the end of the calendar month for which the benefits are claimed.

Benefits from the Employment Agency can be granted for a maximum period of 6 years, but end earlier if the employee has acquired an unreduced pension entitlement, is actually drawing an old-age pension or has reached the age of 65.

The procedure does not incur any costs for employees. Although they only work half of their previous working hours, they receive around 70 percent of their previous salary. The employer can calculate the effect on the net salary before the agreement is concluded. Partial retirement workers receive the salary and the top-up amount from their employer.

The employment agency reimburses the employer

• the top-up amount of 20 percent of the standard salary and
• the additional pension insurance contributions in the amount of the contribution attributable to 80 percent of the standard pay, up to a maximum of the contribution attributable to the difference between 90 percent of the monthly contribution assessment ceiling and the standard pay.

Benefits from the Employment Agency are paid monthly in arrears.