Is partial retirement possible? You need to know these rules

Partial retirement can be an option for older workers to gradually exit their jobs. However, there's one thing you should definitely consider.

It's the dream of many older workers: to work less and have more free time – for family, for example, or for hobbies. Partial retirement can be one way to achieve this goal.

This involves employees reducing their working hours by half and gradually retiring from their job. This sounds tempting at first. But partial retirement isn't a sensible option for everyone, emphasizes Johannes Schipp, a specialist employment lawyer from Gütersloh . Those interested should consider whether they can afford it financially.

You must be aware that you will earn less during partial retirement. While your employer will top up your salary and pension contributions, this will not be 100 percent in either case. This means that in addition to lower earnings, you will also receive a lower pension later on. However, the loss will be relatively small due to the employer's statutory obligation to contribute.

The pension insurance agency or a pension advisor can help determine whether partial retirement is suitable for you. If so, further requirements must be met. "First, the employee must be at least 55 years old," says attorney Judith Kerschbaumer of the Verdi labor union. Before starting partial retirement, you must have been employed for at least 1,080 calendar days (approximately three years) and be subject to compulsory insurance contributions.

Second, your employer has to cooperate. "Employees don't have a legal right to partial retirement," Schipp clarifies. However, entitlements may be stipulated in works agreements or collective bargaining agreements. If such rules don't exist, the employer can voluntarily give the green light for an employee to leave earlier.

If the employer agrees, the salary during partial retirement consists of half of the previous salary subject to social security contributions plus the top-up contribution. By law, the top-up contribution must be at least 20 percent of the salary during partial retirement.

"The employee can also negotiate an employer top-up beyond 20 percent," says Schipp. He knows of cases where employees in partial retirement received up to 90 percent of their original salary. The employer also continues to pay into the pension fund on your behalf – at least 80 percent of the pension insurance contributions, but no more than 90 percent.

There are two versions of partial retirement. With a uniform reduction, you halve your working hours over the entire period of partial retirement. "The so-called block model is far more popular," says Kerschbaumer. In this model, the employee works as they did before the start of partial retirement for the first half of the period and is released from work for the second half.

The employer pays 50 percent of the employee's earned salary during the working phase and 50 percent during the leave phase. "The employer's top-up payments are added in both phases," explains Kerschbaumer.

The partial retirement model can also be an option for employees who already work part-time in their regular careers. The prerequisite is that they are not in marginal employment (mini-job) and their part-time earnings during partial retirement are higher than with marginal employment.

How the reduced working hours are distributed is decided jointly by the employee and employer. "It's conceivable, for example, to work four hours on four days and three hours on the fifth," explains Schipp. Another option is to work three days, then two days off.