Working End > Pension > Semi-Retirement

Semi-Retirement or Partial retirement

Semi-retirement is a special form of part-time employment which employees from the age of 55 on are legally entitled to. The legal basis is Semi-retirement Act (AltersTG). The law does not provide any a priori entitlement, rather, the entitlement can be given by a collective agreement, company agreement or employment contract. Semi-retirement work can only be mutually agreed between employer and employee, i.e. it is voluntary on both sides.

A connection between semi-retirement and severance payment does not exist, initially. However, voluntary company agreements or collective agreements can create some dependencies. For instance, in the regular collective agreement of German public service, Tarifvertrag ATZ, entitlement to a severance payment is given if e.g. the employee is unable to dictate duration and start of the semi-retirement.

Kinds:

• Continuous semi-retirement, or equal distribution model
  For the whole period of semi-retirement work, that is until pension paid (maximum 10 years), the employee works only 50 % of his previous working hours
• Block model
  The working hours of the employee remain the same for the duration of a first half phase, and during the second half phase there is no more work done at all, while the employee’s remuneration is a reduced one that is paid throughout the two phases

Income:

• The employer pays remuneration for the half working hours plus an additional rate of at least 20 % of that remuneration
• For clerks and public servants, additional rates are such that the total net remuneration will be at least 83 % of the previously earned net remuneration
• What counts into remuneration is monthly basic payment, bonuses, additional payments, payments in kind as company cars, as well as capital-forming payments. Not counted are one-time payments, over-hours remuneration, and other irregularly paid incomes. Once, however, such irregular are distributed over months, they count as regular as well
• Additional rate amounts are generally taxless to the employee, but with progression

Social insurance:

• The employer pays pension insurance contributions amounting to 19.5 % based on 80 % of regular working remuneration, respective maximum 90 % of the legal contribution assessment ceiling
• The employer pays contributions to health- nursing-care- and unemployment insurance based on regular working remuneration. Additional rates are not included

Support of semi-retirement by the German labour agency:

• The employee must have been in employment for at least 1,080 calendar days, that is 3 years approximately, 5 years before entering semi-retirement. It must have been an employment with social insurance obligation, thus being paid more than 400 Euros a month. Periods of unemployment benefit I or II or of sickness benefit are equivalent to social-insured employment. The past employment may even have been abroad within EU
• There is a contract or agreement on semi-retirement
• The workplace being released by semi-retirement will be re-filled with a getter of unemployment II or with an adopted finished apprentice
• Labour agency refunds additional rates – maximum 20 % of regular remuneration – and the additional pension insurance contributions to the employer
• Refunding of such payments is given for maximum 6 years, respective until retirement pension is paid or the employee has reached the age of 65
• Semi-retirement must be entered before Jan 1 2010 in order to still be supported in those ways

Procedure and conditions of support:

• First, the employer must file an application for acknowledgement of refilling of the released job at the labour agency locally responsible for the site of the company in which the semi-retired employee is employed. For everybody’s security in planning regarding the acknowledgement of refilling, this application should be filed early. Best is to file it within 3 months after gaining of all support prerequisites, in order to receive money earliest possible
• After that, an application for payment has to be filed. Payment is done monthly and subsequently. There is no time deadline for the application. Long term limitation period is 4 years. The support/subvention of payments is given for the whole duration of the semi-retirement, that is, maximum 10 years. In the block model, twice the payment is given as soon as in the second half phase of exemption the job has been refilled, since phase one is without payment
• Note: If the start date of the semi-retirement is before Juli 1 2004, regulations are different

Benefits in statutory pension insurance:

• Uncut pension from the age of 65
• The earliest age to go on pension, for the age group of born in 1948 or later, is possible from the age of 63
• If statutory pension is received before the 65th birth day, the monthly pension of all time of payment is cut by 0.3 % per month of early payment

Insolvency of the company:

• In the block model, the employee effects prior performance in the first phase, since he works more than he is paid. That virtual money value is the basis of the second phase payments. In case of insolvency, it can be lost
• However, Semi-retirement Act § 8a obliges the employer to effect a respective insolvency security

Side-job:

• During any period in which the employee is working in a side job in parallel that is larger than a so-called minimal employment, this ceases the employer’s entitlement to supportive payments from the labour agency. Collective agreements can effect then that no longer additional rates and pension insurance contributions will be paid by the employer
• Side-jobs during the block model’s exemption phase are not allowed at all. The only exception is side-jobs that have already been exerted for 5 years before semi-retirement permanently

Sickness during semi-retirement:

• Sickness during the block-model’s exemption phase does not affect anything
• In case of sickness during the working phase, the employee is entitled to regular continued remuneration payment of up to 6 weeks. Thus, during that time, semi-retirement remuneration, additional rates and pension insurance contributions are paid. After those 6 weeks, the semi-retired employee is only paid sickness benefit

Dismissal during semi-retirement:

• A dismissal during the working phase is handled normally as dismissals of regular employed are
• During the exemption phase, no dismissal is feasible since no more duty of work is there

• Inform yourself about current regulations on semi-retirement in your company
• Appoint with your employer, besides working hours and remuneration:
  • Annual payments, like profit sharing
  • Super-collective contract groups
  • Salary adjustments
  • Supportive payments to pension insurance
  • Company pension
  • Company-specific special payments, e.g. company cars
  • Asset formation
  • Employee shares, if there are participation schemes
  • Transitional payment
  • Severance payment
  • Side-jobs
• Use the time you gain to prepare for retirement
  • Prepare the handover to your successor
  • Think about new goals and activities
  • Already start doing new things, but without payment. If required, build new contacts for that
  • Say goodbye to your colleagues
• Comply with the regulations on side-jobs

• Sample, template: agreement about semi-retirement (only in German)
• ArbeitsRatgeber - Altersteilzeit

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