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Gradual retirement Altersteilzeit = part-time for older workers

Country of implementation
Germany
General short description of the innovation
Following agreement with their employer, older workers may reduce their working time by 50%. In order / to qualify as part-time work under this scheme, the employer must pay them as if they were working 70% of their previous working time and must supplement contributions to the pension fund as if they were earning according to 90% of their previous working time. If the employer would hire an unemployed person or a person following completion of an apprenticeship, the Federal Employment Agency (unemployment insurance fund) would reimburse the employers¡ extra wage costs as specified above for the duration of the scheme, maximum 6 years. This subsidy was closed for new entries into the scheme from 2010. / The agreement regarding the reduction of working time must extend until the worker qualifies for an old-age pension. Participants in the scheme used to qualify for a category of premature pension defined by either long-term unemployment or having participated in a gradual retirement scheme. The earliest possibility for entering this type of pension used to be 60. Between 1997 and 2007, the age threshold for / receiving this category of early pension without actuarial deductions was gradually raised to 65. Deductions to be incurred if the pension was entered at 60 grew to 18 per cent of the pension accordingly. Between 2007 and 2014, age thresholds for entering this type of pension at all (even with actuarial deduction) were raised from 60 to 63. Workers born in 1952 or later do not qualify for an early pension by virtue of participating in a gradual retirement scheme. For them, the general statutory pension age applies which has started to rise gradually from 65 to 67 between 2012 and 2029. (If they have accumulated at least 35 years of contributions to the pension fund, they still may retire at 63 with actuarial deductions, but this is not specific to gradual retirement. Likewise, they may benefit from regulations for very long-term contributors ¤ 45 years ¤ which again are not specific to gradual retirement). During the duration of the scheme, actual working time may vary if it amounts to an average of 50% of the workers¡ working time before entering the scheme. If framed by a collective agreement, the period during which an average of 50% is reached, may extend over a period of six years. In practice, in accordance with the collective agreements in place, at least 90% of the participants in gradual retirement schemes continue to work full-time during the first half of the scheme and take time off during the second half. In effect, during the second half, they are ‰early retirees¡ but still receiving wages from their employer and counted as employed in statistics. This is referred to as the ‰block model¡ of implementing gradual retirement (which, in this majority of cases, is not really gradual). Where the block model is used, the employer is obliged to have an insurance against insolvency because employees work in advance for pay they only receive later. The worker has no legal right to a gradual retirement scheme; neither can workers be forced into such scheme; it is a matter of agreement between workers and employers. Collective agreements may create criteria for eligibility or procedures of selection. This is why implementation is rare in firms not covered by collective agreements.
Target group
Older Workers
Policy Field
  • pension
Type of Policy
  • other (governmental)
Duration of the policy
1996, scope reduced from 2010, but still ongoing
Scope of innovation
  • Scope: It was a structural innovation within the range of options for retirement.
  • Budgets: 1.3 billion Euros annual expenditure from the unemployment insurance fund since 2006. Since these subsidies set in only when replacements are hired and since in the prevailing ‰block model ¡ replacements can only be hired when the ‰part-timer¡ starts his or her period of leave, these expenditures set in with a considerable time -lag. They are declining only very slowly since their peak in 2010 even though subsidies were closed for new entrants into the scheme from that year. Draft legislation of 1996 presupposed that expenditures would be set off by savings in unemployment benefits. Therefore, there was no predefined budget.
  • Number of intended beneficiaries: 150,000 participants per year were expected in the justification for the draft legislation. Actual participation exceeded 500,000 in 2006/2007, whereas average stocks of subsidized cases ran at around 100,000 throughout the years 2006 to 2008, with a gradual decline since.
  • Spatial coverage: national
General description of (intended) objectives and strategies
According to the justification of the draft for legislation of 1996: / / facilitating gradual transitions from working to retirement / / giving companies a way of adapting their productive capacities without dismissals / / creating an alternative to the then prevailing pattern of early retirement: dismissal ¤ unemployment ¤ premature pension / / unburdening unemployment insurance and state pension fund from the costs of early retirement
Nature of the innovation-long-term perspective
This innovation was long-term but not radical. When first introduced in 1996, it was meant as support for working longer in a person¡s life by working shorter hours. In practice, however, it was turned into a slightly modified pathway to early retirement.
Type of ideal-typical strategy for the innovation
  • typical strategy for the innovation (optional; according to Obinger)-dualisation
  • typical strategy for the innovation (optional; according to Obinger)-flexicurity
Type of innovation
  • new policy, practice or measure
New outputs
  • bargaining (was important to frame the scheme and to establish procedures for application and selection. )
  • benefit eligibility (participants in the scheme were made eligible for a category of premature pensions which previously was only available after long-term unemployment )
  • benefit level (The scheme implies that workers will have only slight losses in their pensions though their earnings and thus their own contributions to the pension fund are reduced)
  • working time (Nominally, working time of older workers was reduced, In the practice of the eblock mod eli, continuing to work full-time was followed by a period of leave. )
Intended target group
workers aged 55 and older
Working age population
  • employment situation (please specify: e.g. typical work/atypical/unemployed) (typical)
  • main source of income: paid work
Employers-private institutional actors
Large companies in the metal industries, chemical industries, mining, energy production, the finance sector and the public service are the principal fields of implementation
Actors involved in policy-making/implementation and/or evaluation
  • making/implementation and/or evaluation-agency or national social insurance body (Federal Employment Agency only in a paying role (gradually dwindling down since 2010 when subsidies from the unemployment insurance fund were closed for new entrants) )
  • making/implementation and/or evaluation-central state (Legislation prepared by the Federal Ministry of Employment and Social Affairs )
  • making/implementation and/or evaluation-employees (organised or individual) (mirroring employers¡ involvement )
  • making/implementation and/or evaluation-employers (organised or individual) (mainly organized because of implementation in the framework of co llective agreements; individual agreements legally possible) )
Clarification of the role of various actors
The role of the social partners at sectoral as well as establishment level is key to the implementation of the scheme.
Intended output
  • benefit eligibility (participation in the scheme led to eligibility for a particular category of premature pension until these pension schemes were phased out )
  • benefit level (pension losses that would normally result from working part-time are partly avoided t hrough the employers¡ obligation to pay pension fund contributions as if the worker had worked 80% (instead of 50%) )
  • leave schemes (the final stage of participation in the scheme when implemented as a block model takes the form of a leave )
  • wages (must be supplemented above what would be paid for part-time)
  • working time (supposed to be halved under the scheme; in the dominant block model, this applies only on average over the whole duration of the scheme )
Did the innovation have any outcome related to job quantity?
keeping older workers employed longer, at least formallyslightly rising because of additional burden on employerskeeping older workers employed longer, at least formally avoiding pathways to retirement via unemployment
Intended and unintended outcomes
20% of employed age group 55 plus
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