Early retirement following the pensions reform

Download article in original language : FR0406106FFR.DOC

France's 1993 pensions reform law included a number of measures aimed at keeping older people in employment longer, including raising to 65 the age at which an employer can initiate an employee's retirement, and abolishing or restricting many forms of early retirement. In summer 2004, it appears that the law has not yet had a major impact on the retention of older workers. The law allowed exemptions from the ban on employer-instigated retirement before the age of 65 through sectoral collective agreements on the issue, and there has been a spate of such agreements since autumn 2003. Moreover, the methods for early retirement that are still in existence are being used more and more.

One of the objectives of the law of 21 August 2003 on pension reform was to raise the employment rate of older workers (FR0309103F). A number of its provisions were aimed at keeping older people in employment, including:

• raising the age at which an employer can oblige an employee to retire to 65, instead of the age at which the employee can claim a full pension (though see below);

• increasing the cost of company early retirement schemes;

• eliminating progressive early retirement (préretraite progressive, PRP) and the 'early retirement for certain employees' (cessations anticipées pour certains travailleurs salariés, CATS) scheme (FR0102131F), where not unrelated to the arduousness of the work; and

• placing restrictions on state-financed early retirement schemes.

During the parliamentary debate over the law, few amendments were agreed, but some of them have had an important impact, including one relating to the provisions on retirement before the age of 65.

Employer-instigated retirement still possible before 65

As mentioned above, the pensions reform law raised the age at which an employer can place an employee into retirement to 65. This means that any termination of the employment relationship by the employer before the employee reaches this age constitutes a dismissal. Prior to the reform, this form of employer-instigated retirement was possible as soon as the employee had earned eligibility for a full pension, ie as early as 60.

However, following parliamentary amendment, the final version of the law adds an important possible exemption. Employers may still require employees who have the right to a full pension to retire between the ages of 60 and 65 if:

• the worker is covered by an early retirement scheme put in place before the new law came into force; or

• an extended sector-level collective agreement (ie one made binding on all employers in the sector by government order) providing for compensatory measures for such retirement - in terms of employment and vocational training - is reached before 1 January 2008.

In both such cases, retirement instigated by the employer before the age of 65 is not regarded as the equivalent of a dismissal.

Since the pension reform law was passed in autumn 2003, a number of sectors have taken advantage of the second option it provides for maintaining retirement before the age of 65. Numerous collective agreements have been signed on the issue in 2004, including in sectors such as oil, supermarkets and hypermarkets, car repair, rubber, chemicals, metalworking, pharmaceuticals, textiles and waste management. So far, only the agreement reached in the metalworking industry in December 2003 has been extended to the whole sector (in May 2004).

With regard to the details of the trade-offs for allowing retirement before 65 in terms of recruitment and training, this is left by law to collective bargaining. Most of the agreements concluded provide for new recruitment on various types of contract, including full-time jobs on open-ended contracts, apprenticeship contracts and various types of subsidised contracts involving in-house training (contrats de qualification and contrats de professionnalisation). So far, no agreement provides for the compensatory recruitment of older workers. However, some agreements specifically provide for training aimed at older workers.

Other methods of early exit

The 2003 reform law regulates retirement and early retirement at the employer’s initiative in a very detailed and restrictive manner. Furthermore, the abolition of a scheme allowing the payment of unemployment benefit until retirement age to unemployed people aged 50-57 has made it more expensive for companies to negotiate workforce reduction plans. However, agreements providing for early retirement under the CATS scheme (see above) on the grounds that the employee's work has been arduous are still possible. The number of people taking the CATS option is thus rising.

The options for retirement at the employee’s initiative are much more varied. Retirement due to having started work at an early age (FR0312102N) and its equivalent for disabled workers, as well as the early retirement scheme for those who have worked with asbestos (cessation anticipée d’activité pour les travailleurs de l’amiante, CAATA) (FR0307105F) require certain criteria to be met. When these criteria are satisfied, actual retirement depends on the employee’s desire to leave. Moreover, the 2003 law reduced the degree to which retirement before full pension rights have been accrued is penalised. It is thus now possible for the employer to increase the incentives for older workers to leave. Several recent collective agreements have thus seen retirement compensation packages increase in value, especially for those retiring because of having started work at an early age.

Lastly, certain exit methods have increased in popularity among older workers, such as sick leave, exit due to invalidity and dismissal due to incapacity for work. The Old-age Insurance Fund for Wage Earners (Caisse nationale d’assurance vieillesse des travailleurs salariés, CNAVTS) has observed that the proportion of employees in the 'unfit for work' category at the moment their pension becomes payable rose in 2002, having previously been falling since the early 1980s. The proportion now stands at almost 16% of new pensioners under 65. This development, which has been noticeable over the past few years, poses a problem both in terms of the objective of keeping older workers in the workforce, and of funding social welfare.

Concern

In its second report presented to the Prime Minister on 3 June 2004, the Pensions Stewardship Council (Conseil d’orientation des retraites, COR) (FR0201112F) expressed concern that no changes in the practice of retaining older workers in the workforce were in sight. It feels that legal measures will be insufficient to set in motion a complete reversal of employers’ current practices. Strong initiatives need to be taken on the employment of older workers. The Prime Minister stated that the employment of older workers is one of the government’s priority action areas, and that he will make sure the social partners are closely linked to the initiatives taken in this field in the future.

Commentary

For 55-64 year olds, the employment rate rose by 5% between 2000 and 2002 to exceed 39%. However, this increase is due almost exclusively to structural effects. It does not yet mean that there has been a genuine reversal of the trend toward earlier exit for older workers. Moreover, issues related to incapacity for work and work-related difficulties have become more serious because of the reduction in early retirement options. There is now a real problem of former methods of early retirement being substituted by those linked to health/invalidity and disability. (Annie Jolivet, IRES)