In the case of partial retirement, both the salary and the 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 you need to bear in mind.
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. So instead of retiring directly from full-time work, working hours are reduced before retirement.
In order to be eligible for partial retirement, you must apply for it for at least 3 years. The maximum duration of the overall 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 from paying off their pension provision. 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 designed in such a way that the costs for employers nevertheless remain lower than if the employee continued to work full-time during partial retirement.
It also creates 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 runs 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 reduced to 2 hours.
Alternatively, it is also possible to reduce the number of working days. Instead of working 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 on a predetermined date. The salary will then continue to be paid during this release phase.
The models can also be freely combined so that the reduction in working hours and the release phase can be planned in advance. Provided the employer and employee agree, these two models can be used to create all kinds of constellations. Of course, it is important that the minimum legal requirements are met.
However, these requirements are very straightforward. There is no statutory 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.
Certain requirements must be met by the employee in order to be eligible for partial retirement. The employee must have reached the age of 55 and have been subject to social insurance 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 in private life, but also in the company. To ensure that this goes according to plan, only the minimum legal requirements need to be observed.
