In the case of partial retirement, both pay and pension insurance are topped up. However, an application must be submitted for this. The state guarantees special tax privileges for partial retirement so that the financial losses remain low. This article explains exactly how partial retirement works and what needs to be taken into account.
The costs of partial retirement
Partial retirement is a special working time model designed to ensure a smooth transition from working life to retirement without directly jeopardizing old-age provision. Instead of going straight from full-time work to retirement, working hours are reduced before retirement.
In order to take advantage of partial retirement, it must be applied for for at least 3 years. The maximum duration of the total term is 6 years.
To ensure that the financial losses for employees in partial retirement are not too high, employers must increase their salary by at least 20 percent. This prevents employees from getting into financial difficulties directly as a result of the reduced hours and their pension provision being eroded. This also includes pension insurance contributions, which employers must pay at least 80 percent of for employees in partial retirement.
What at first sounds like a major disadvantage for employers is actually an advantage. This is because the percentages are set in such a way that the costs for employers still remain lower than if the employee continued to work full-time during partial retirement.
It also allows for a smooth transition within the company. Employees in partial retirement can train new employees directly and thus pass on all important information and knowledge.
Employees in partial retirement, on the other hand, have a better start to their retirement as they have time to get used to the increased free time.
The partial retirement models
Partial retirement can be implemented in various models. There is basically no limit to individuality. However, a distinction is first made between two models of partial retirement:
As the name suggests, the equal distribution model works in such a way that the employee’s working hours are continuously reduced during partial retirement. This continues for a certain period of time until retirement.
For example, with a partial retirement period of 3 years, the employer could only work 4 hours per shift instead of 8 hours in the first year. In the second year, the number of hours per shift is then reduced to 3 hours and in the third year it is still 2 hours.
Alternatively, it is also possible to reduce the number of working days. Instead of 5 days a week, the employee in partial retirement then works one day less each year, for example.
In the block model of partial retirement, on the other hand, working hours are not initially reduced at all, but are then released at a predetermined time. The salary continues to be paid during this release phase.
The models can also be freely combined with each other so that the reduction in working hours and the release phase can be planned in advance. If the employer and employee agree, all possible constellations can be created from these two models. Of course, it is important that the minimum legal requirements are adhered to.
However, these requirements are very straightforward. There is no legal entitlement to partial retirement. Unless there are collective agreements or special agreements in the company that have anchored this model in the company’s own regulations.
The employee must meet certain requirements in order to be eligible for partial retirement. The employee must have reached the age of 55 and have been subject to social security contributions for at least 1,080 days in the last 5 years.
The weekly working hours must be reduced by at least half during partial retirement. This also applies to part-time employees. And partial retirement must be continued until retirement.
Mini-jobs or other marginal employment models are not taken into account for partial retirement.
Conclusion
Partial retirement has advantages for both employers and employees. The smooth transition is not only successful privately, but also within the company. To ensure that this goes according to plan, only the minimum legal requirements need to be observed.