Partial retirement

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Partial retirement in Germany and Austria a way a reduction of working hours (part-time or block model) or premature termination of active service to transition to retirement prepare. If the partial retirement of older employees creates new jobs for younger employees, the partial retirement is financially supported by the respective labor market administrations, but in Germany only those employees who have reduced their working hours before 2010 are supported.


With the statutory regulations on partial retirement, the legislature aims to enable older employees to make a smooth and early transition into retirement and at the same time to create incentives to fill the vacant jobs. In practice, however, partial retirement is also used to reduce jobs.

There are two variants of partial retirement:

  • With continuous partial retirement (also known as the equal distribution model ), employees reduce their working hours to half their original working hours over the entire period of partial retirement.
  • The newer and now almost exclusively used form of partial retirement is the block model . Partial retirement is divided into two employment phases of equal length. In the first, so-called work phase, the weekly working time remains unreduced. In the second phase, the release phase, the employee is released from his work. This also results in a reduction in working hours over the total duration.

In principle, partial retirement is a part-time employment. Differences to normal part-time work result in particular from the eligibility requirements for the promotion of partial retirement, but also with regard to the valuation of provisions.

Legal structure in Germany

Basic data
Title: Partial Retirement Act
Previous title: Law to promote the smooth transition of older workers into retirement
Abbreviation: AltTZG
Type: Federal law
Scope: Federal Republic of Germany
Legal matter: Employment Law
References : 810-36
Original version from: December 20, 1988
( BGBl. I pp. 2343, 2348 )
Entry into force on: January 1, 1989
Last revision from: July 23, 1996
( BGBl. I p. 1078 )
Entry into force of the
new version on:
August 1, 1996
Last change by: Art. 22 G of December 12, 2019
( Federal Law Gazette I p. 2652, 2701 )
Effective date of the
last change:
January 1, 2024
(Art. 60 G of December 12, 2019)
GESTA : G026
Weblink: Text of the law
Please note the note on the applicable legal version.


Partial retirement was regulated in the Federal Republic of Germany by the Partial Retirement Act (AltTZG), which came into force on August 1, 1996 and replaced the early retirement scheme and also applied to the new federal states from 1990 onwards. The partial retirement law is a labor market promotion law. The then Federal Employment Agency (BA) estimated the savings by 2003 through the introduction of the Partial Retirement Act at DM 2.1 billion and the statutory pension insurance with savings of DM 17 billion.

The new regulation affected employees from the age of 55, provided the employment contract parties agreed, who halved their working hours at 70% of their previous net earnings, but at least 18 hours a week. The employer paid 50% of the previous gross salary, the remainder was contributed by the Federal Employment Agency, but only on the condition that the vacant position due to the part-time worker was filled by an unemployed person or a young professional. In addition, the Federal Employment Agency has increased the pension contribution for partial retirement to 90% of full-time wages. The arrangement of the age was optional, but the working hours had to be halved within one year. Thanks to a collective agreement , half the working time could be distributed as required over a period of up to five years.

Even before the law came into force, a collective agreement on partial retirement was concluded in the chemical industry at the beginning of 1996 , in which the remuneration for retirement was increased by employers from 70% to 85% of the last net wage. The employees were free to choose whether to work part-time for five years or full-time for two and a half years , leaving when they were 57.5 years old. By March 1997, around 3,600 employees in the chemical industry had made use of the scheme. In June 1997 the Volkswagen Group agreed to an increase in partial retirement pay to 85% of the last net wage, with employees working full-time for 2½ years and taking early retirement at 57.5 years.

Last status of the partial retirement scheme

Partial retirement will continue to be financially supported by the Employment Agency if it was started by December 31, 2009 at the latest and the employee was 55 years of age at this point. As part of the partial retirement contract, the employer increases in particular the standard wage and the pension insurance contributions. If the regular wage for the partial retirement is increased by at least 20% of the regular wage (i.e. to at least 60% of the remuneration before the partial retirement), the employer will be reimbursed this amount by the Federal Agency ( Section 3 Paragraph 1 No. 1 lit. a; Section 4 AltTZG)

Beispiel: Vollzeitentgelt = 1500 €
Teilzeitentgelt 50 % von 1500 € = 750 €
Aufstockungsbetrag 20 % von 750 € = 150 €
Bruttoteilzeitentgelt = 900 €

The top-up amount is tax-free for the employee in accordance with Section 3 No. 28 EStG , but is subject to the progression proviso . The employee only pays wage tax for 50% of the previous full-time income . Only when the income tax is assessed is an additional tax payment due due to the progression proviso, as the average tax rate of the 60 percent income (50% + 20% of 50%) is applied to the 50 percent income. Collective agreements often provide for higher top-up amounts.

The usual social security contributions are due for the remuneration that the employee receives for his partial retirement. In addition, the employer (alone) pays additional contributions for the pension insurance on the basis of 80% of the standard wage for part-time work for older people, but in total for a maximum of 90% of the income threshold .

Full-time pay = € 1500.00
Part-time pay (standard wage for part-time work for older workers) 50% of € 1500 = € 750.00
Pension insurance contribution on this 19.9% ​​of 750 € = 149.25 €
Additional pension insurance contribution (employer only) 19.9% ​​of 80% of € 750 = € 119.40
total pension insurance contribution € 268.65
In relation to the original full-time salary, this corresponds to 19.9% ​​of 90% of € 1500 = € 268.65

As can be seen from the example, the increase of 80% of the standard wage for part- time work for older workers means that pension insurance contributions are paid for 90% of the original full-time wage. The top-up amount is not taken into account when calculating the contribution to other social insurance. Only the standard wage is decisive for the calculation of the contributions to health, long-term care and unemployment insurance.

Effects in the statutory pension insurance

In the statutory pension insurance , special age limits for partial retirement still apply for a transition period. For those born up to and including 1951 there is still the “old-age pension due to unemployment” or partial retirement. The earliest possible drawing of a social security pension is possible:

  • for those born in 1945 at the age of 60
  • for those born between 1946 and 1948, increasing monthly at the age of 60, 61, 62 or 63
  • for those born between 1949 and 1951 at the age of 63.

In all these cases, a pension with no deductions is only possible from the age of 65. For every month by which the statutory pension is drawn before the age of 65, it is reduced for the entire duration of the payment by 0.3% per month of early withdrawal. In addition - for all other age groups only - the other old-age pensions from the statutory pension insurance are also possible, namely the old-age pension for long-term insured persons, the old-age pension for the severely disabled and the old-age pension for women (also only for those born before 1951) with different entry ages and discounts . For the employee's losses resulting from the deductions, some employers grant severance payments in addition to other benefits .

Insolvency insurance

If the partial retirement takes place in the block model, the employee performs his work in full in the work phase, but during this time only receives the part-time remuneration plus the additional amounts. Thus there is a backlog on the part of the employer. The amount of this performance arrears, the so-called credit balance , is not given priority in the event of the employer's insolvency and can therefore be largely lost. Therefore there is a need to secure the credit against the insolvency of the employer.

Up to June 30, 2004, the legal basis for insolvency insurance was Section 7d of Book IV of the Social Code . Since July 1, 2004, the amendments to the Third Act for Modern Services on the Labor Market (Hartz III) have specified the requirements for insolvency insurance in Section 8a of the Part- Time Workers Act (AltTZG). According to this, the employer is obliged to carry out the insolvency protection in a suitable manner; Group guarantees are not suitable for this ( Section 7e (3) SGB IV).

Promotion of partial retirement

The prerequisite for the promotion of partial retirement is, on the one hand, an increase in the standard wage for partial retirement and the pension insurance contributions (see above). On the other hand, on the occasion of the transition to partial retirement, an employee who is registered as unemployed or a trained person must be employed subject to compulsory insurance. (AtG-DA § 3.1.7 Paragraph 2) Small companies with up to 50 employees have the option of employing a trainee instead of the employee registered as unemployed or the trained person (AtG-DA § 3.1.7 Paragraph 9)

If the requirements are met, the Federal Employment Agency will reimburse the employer for the top-up payments amounting to 20% of the regular wages paid for partial retirement and the additional pension insurance contributions paid. The funding period is a maximum of 6 years, even if the individual partial retirement contract was concluded for a longer period. With the block model, the reimbursement is only made during the exemption phase, but then in double the amount.

The last time that partial retirement is funded is for those starting partial retirement in December 2009. The time value accounts are an alternative for later cohorts .

In the metal and electrical industry, the collective bargaining parties IG Metall and Gesamtmetall have concluded regional collective agreements for the flexible transition to retirement over the statutory provisions. The aim was to combine the provisions regulated in different collective agreements in a single collective agreement. Partial retirement will continue without funding from the Federal Employment Agency; the employees contribute 0.4% of the 2009 pay increase to finance.

Accounting for partial retirement obligations

The principle that the work performed by the employee during the current employment relationship is equivalent to the remuneration paid by the employer (principle of equivalence) and that the balance sheet is therefore omitted does not apply in the case of partial retirement.

  • The backlog in the block model represents an obligation on the part of the employer. The employee has already performed work for which he has not yet received any remuneration. For the remuneration to be paid in the release phase, a provision must be made during the work phase and topped up on a pro rata basis until the release phase is reached.
  • Under commercial law, the top-up amounts to be paid must be deferred in full upon conclusion of the partial retirement obligation. In terms of tax law, these are to be accumulated proportionally like the performance arrears.
  • For tax purposes, reimbursement claims against the employment agency, insofar as they are probable, must be offset against the provision.
  • If necessary, promised severance payments for the losses in the statutory pension insurance are also made without consideration, so that the corresponding obligation must be shown in full in the balance sheet.
  • According to the German Commercial Code (HGB) - in application of the provisions of the Accounting Law Modernization Act (BilMoG) - cover assets (e.g. assets in a trust model), which were created to protect the assets against insolvency, must be offset against the provision. More precisely, with the credit that the employees have earned. If the plan assets exceed the credit balance, it is to be shown as an active difference from the asset offset. The same applies to expenses and income from the discounting of the partial retirement provision and from the assets to be offset ( Section 246 (2) sentence 2 HGB ).

The Institut der Wirtschaftsprüfer has published an announcement on the accounting of partial retirement relationships (IDW RS HFA 3). The Federal Ministry of Finance has also commented on the issue.

Legal structure in Austria

In Austria, partial retirement is regulated by the Unemployment Insurance Act (Section 27). The Public Employment Service is responsible for paying out the funding . Partial retirement was introduced as part of a "pact for older workers" on January 1, 2000, and in 2004 the entry and funding conditions were significantly tightened, including through an adjustment to the pension reform. There must be periods of unemployment insurance for at least 15 years within the last 25 years prior to the transition to partial retirement, with childcare periods extending the framework time.

The earliest entry age is fixed at seven years before the standard retirement age, i.e. 58 years for men and 53 for women, the duration limited to a maximum of five years.

Part-time retirement can only be started by people who previously worked at the company for at least three months on a time scale between 60% part-time and full-time. The working hours are then reduced to 40–60%, either through a continuous reduction in working hours (e.g. 20 instead of 40 hours per week) or through 'blocking' (one half of the ATZ continues to work fully, the other half is paid free time - so it is practically relocated retirement forward). The employees receive wages equal to half the difference in wages. These expenses (including social security contributions) are initially borne by the employer, but then reimbursed by the AMS for half or 90% - depending on whether the block model or continuous reduction in working hours is agreed.

  • With the block model, only half of the additional expenses are reimbursed to the employer. A replacement worker or an apprentice must also be employed by the start of the leisure phase at the latest, otherwise the employer must repay the AMS in full.
  • In the event of a continuous reduction in working hours, the employer will be reimbursed 90% of the additional costs; the mandatory hiring of a replacement worker is not applicable.

Due to transitional provisions in pension law, the limit of five years for the maximum period of partial retirement can be exceeded. The social security contributions are paid during the ATZ in the same amount as before, and any severance payment entitlement is calculated on the basis of the previous normal working hours.

See also

Web links

Wiktionary: Partial retirement  - explanations of meanings, word origins, synonyms, translations

Individual evidence

  1. For the latter see Wolfgang Förster, Heinz-Josef Heger: Partial retirement and company pension scheme. DB 1998, pp. 141, 143 ff.
  2. Wolfgang Förster / Heinz-Josef Heger, Partial Retirement and Company Pension Plans, DB 1998, 141, 141
  3. ^ IG Metall Germany: New partial retirement., archived from the original on January 17, 2008 ; Retrieved May 8, 2008 .
  4. z. B. BMF letter of March 28, 2007, IV B 2 - S 2175/07/0002, full text = BStBl I, 2007, 297; BMF letter of March 11, 2008.
  5. Styrian Chamber of Labor ( Memento from January 23, 2009 in the Internet Archive )
  6. Current regulations (AMS). Retrieved October 3, 2016 .