Social partners propose measures to increase the average retirement age

The 2011 annual meeting of the social partners framed proposals for increasing average retirement ages in Austria, currently comparatively low by international standards. While the statutory retirement age will eventually be 65 for both men and women, the average age of actual retirement is just over 57 for women, and just over 59 years of age for men. The social partners’ suggested measures aim to keep workers in the labour force for an average of two years longer by 2020.

Introduction

The 2011 annual meeting of the Austrian social partners, held in the spa town of Bad Ischl, was dedicated to consideration of ‘The effect of demographic developments on the labour market and the social security system’. At the meeting, the heads of the major social partner organisations discussed a set of measures to increase Austria’s average actual retirement age.

The discussion, which was held in response to a request from the government, involved:

  • Austrian Trade Union Federation (ÖGB);
  • Chamber of Labour (AK);
  • Federal Economic Chamber (WKÖ);
  • Standing Committee of Presidents of the Chambers of Agriculture (PKLWK).

By international standards, Austria has a comparatively low average actual retirement age of 58.2 (57.1 for women and 59.1 for men in 2010). The statutory retirement age is currently 60 for women and 65 for men, but this will move to 65 for both men and women between 2024 and 2033.

Aim is two-year increase by 2020

In their proposed measures to raise actual retirement ages, the social partners focus first on keeping workers in employment for longer through financial incentives, and then on reducing the number of workers retiring early on invalidity pensions. The high number of these pensions accounts for much of Austria’s low average actual retirement age. Applications for such pensions total about 70,000 each year, and 40% were approved in 2010.

Psychiatric disorders are the main reason for applying for an invalidity pension (45% in 2010), with employees in the construction and cleaning industries most affected. A quarter of new invalidity pensioners were unemployed for four years or more immediately before retiring.

The policy presented by the social partners therefore contains financial incentives and rehabilitation, health prevention and integration measures. The social partners would like to implement the new measures in 2012, with the aim being to increase the average actual retirement age by two years by 2020. The policy is expected to save €1.5 billion by 2020, even if some initial investment is needed.

Prevention, wage subsidies and bonus payments

The proposal contains the following suggested measures. Only an outline proposal was put forward by the social partners. We will have to wait until the proposal is made more specific or legislation is prepared for full details.

Bonus payments

Under the proposal, a financial bonus would be paid to those aged 60 or over and who are eligible for early retirement due to long insured periods and sufficient social security contributions, but who instead opt to carry on working. A bonus would also be paid to their employers. The bonus would be tax-free and with no social security contributions deducted. (The scheme granting workers with 420 contributory months or 450 insured months early retirement is being phased out over the period up to 2017.)

In the first year the employer and the employee would each receive €2,000; in the second year the bonus would be €3,000 each and in the third year €4,000 each. In addition, pension payments would be increased slightly when the employee retires at either the statutory retirement age of 65 years or earlier.

Partial retirement

Although no detailed proposals have been put forward, the social partners have suggested that partial retirement could be possible from the age of 62, allowing employees to reduce their working hours and, at the same time, receive part of their pension.

Proposed delay to part-time work rights for older workers

Under current rules, women who have reached 53 and men who have reached 58 are entitled to reduce their working hours (by up to 60%) without substantial loss of income and social security, receiving up to 80% of their former income (AT0110203F). The proposed reform suggests workers could take advantage of this scheme at a later age.

‘Bonus–malus’ system

The proposal suggests a ‘bonus–malus’ (‘good–bad’) system, penalising employers who dismiss an older, long-term employee with penalty payments, and rewarding those who hire employees over the age of 50 by exempting them from employers’ unemployment insurance contributions for such workers. A similar scheme operated until 31 August 2009.

Preventing invalidity

Employees who undertake stressful or physically demanding activities in the course of their work would be offered regular training, whether further training or retraining, from the age of 35. If these workers subsequently switched jobs and received a lower income, financial support would be provided in the form of tax relief. The same type of financial support would also apply to workers aged 50 years or more who switch to a lower-paid job with less stressful duties.

Rehabilitation allowance

A rehabilitation allowance is proposed which would be paid instead of (temporary) invalidity pension payments, and only in exceptional circumstances. This measure would incorporate health treatment and support (for example, qualification measures) to facilitate reintegration into the labour market. Where a worker has psychological problems or mental illness, in-patient care would be provided to clarify and confirm the diagnosis.

Early intervention

The proposal includes a scheme whereby workers who take more than 40 sick leave days a year would be subject to a mandatory consultation and support through the health insurance funds’ fit2work rehabilitation scheme, described in the following section. The same measure would apply to those workers who apply for but are not granted an invalidity pension. Any refusal to participate in the programme would be penalised.

Voluntary training measures can be taken within the framework of the programme and would be rewarded with support for reintegration in the labour market.

If more than one person in a company is facing problems with stressful or physically demanding activities and would like to switch to less demanding activities, participation in a flexibility or qualification consultation programme by the Public Employment Service (AMS) would be encouraged.

Fit2work

Fit2work is a prevention and early intervention programme targeted at:

  • employees taking long periods of sick leave or having a physical or mental impairment;
  • unemployed people with a medical impairment or who are at risk;
  • companies;
  • works councils.

Fit2work does not create a new framework of measures. Instead, it acts to increase awareness of existing measures provided by various authorities and institutions and to link them to increase their use.

The programme seeks to intervene at an early stage when there are signs that someone could become an invalid. Workers are provided with information and consultation on all support and preventive measures in the form of a ‘one stop shop’ and case management. So far the programme has been implemented in Styria, Vienna and Lower Austria. It will be extended to all nine Austrian provinces by 2013.

Reactions to the proposal

Reaction to the social partners’ proposal has by and large been positive. The social partners themselves are happy with the proposed set of measures.

According to WKÖ President Christoph Leitl, the proposal surpasses the social minister’s request to the social partners to find a way of increasing the average actual retirement age by one year by 2020. To further increase that age, he argues that lawmakers need to change the framework conditions.

ÖGB President Erich Foglar believes that the most important condition for employees to retire at a later age is ‘being able to work and having employment’. According to Mr Foglar, the only way to achieve this is to suggest measures targeted towards improving health, employability and work place conditions – which the proposal provides for. Herbert Tumpel, President of AK, added that, in order to meet the demographic challenge, the proposal provides a framework for older people that would allow them to be able to work in a secure job.

The Federation of Austrian Industry (IV), which traditionally does not take part in the annual social partner meeting, has welcomed the measures intended to make access to the invalidity pension more difficult, but urges increased efforts. According to its President, Veit Sorger, the suggestions do not go far enough and will not solve the early retirement problem.

The federal government is also generally content with the suggested set of measures. The Chancellor, Werner Faymann (of the Social Democratic Party SPÖ), the Vice-Chancellor and Foreign Minister, Michael Spindelegger (of the conservative People’s Party ÖVP), the Minister of Social Affairs and Consumer Protection, Rudolf Hundstorfer, and the Minister of Economic Affairs, Reinhold Mitterlehner, were present at Bad Ischl to receive the proposal. The Minister of Social Affairs has said the proposal provides a sound basis for legislation. The Vice-Chancellor and the Minister of Economic Affairs have said they consider the proposal a positive approach but stress that further measures are needed.

Bernadette Allinger, Working Life Research Centre (FORBA)

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