Italy: Reform of right of public sector employees to work beyond retirement age

Recent public employment reform aims to stimulate generational change. The right of civil servants to work beyond retirement age has been removed, and public sector retirees cannot return to their former roles as consultants, public managers or officials. The aim is to create vacancies for 15,000 new civil servants in the next few years.

‘Save Italy Decree’ and 2011 pension reform

Section 24 of Legislative Decree No. 201/2011 (6 December) – converted into Legislative Decree No. 214/2011 (22 December), the so-called 'Save Italy Decree’ – amended the rules on pensions by changing how much recipients can be paid and how they become eligible for pension benefits. The basis of calculating pensions has also changed, and now depends on the amount of contributions paid rather than salary received. The new rules were effective from 1 January 2012.

The reform raised the age for accessing the old-age pension (pensione di vecchiaia) to 66 for both men and women employed in the public sector. There is a staged increase in retirement age for women working in the private sector that will, by 2018, require them to be 66 before they can claim an old-age pension.

Retirement age may also be adjusted in the future in line with the increase in life expectancy estimated by the Italian National Institute of Statistics (Istat). An increase equal to three months was set on 1 January 2013. A second increase will take effect from 1 January 2016 and, according to unofficial estimates, is likely to be equal to four months. However, under the reform, the minimum age of eligibility for retirement pensions will rise to 67 from 1 January 2021, even if the life expectancy increase is lower than expected.

At least 20 years of contributions are needed to be eligible for the old-age pension. In addition, contributions paid by workers who were employed for the first time after 1 January 1996 must guarantee a pension equal at least to 1.5 times the amount of the welfare cheque (assegno sociale). Otherwise, these people will have to wait until they are 70 before they can claim an old-age pension, and then only if they have paid at least five years of contributions.

The reform also changed the regulation of the seniority pension (pensione d’anzianità). Until 31 December 2011, to obtain a seniority pension, a worker had to have paid at least 35 years of contributions and to have reached a certain threshold, worked out by adding their age and the number of years they had paid contributions. This threshold was set at 96 for employees. They could, therefore, retire at 60 with a seniority pension if they had 36 years of contributions, or at 61 with 35 years of contributions. Self-employed workers had to reach a threshold of 97 and so could retire at 61 if they had 36 years of contributions. There was no age requirement for workers who had at least 40 years of contributions. Workers received a seniority pension 12 months (or 18 months for the self-employed) from the date they qualified for it.

Workers can access the new pension scheme (early retirement, pensione anticipata) with a given number of years of contributions regardless of their age. In 2014 and 2015, the contribution period required was 41 years and 6 months for women, and 42 years and 6 months for men. This requirement will in future be revised in line with the estimated increase in life expectancy.

Pensions are reduced if the employee is less than 62 years-old (1% of the pension amount for the first two years of early retirement and 2% for each further year). These reductions do not apply to workers employed for the first time after 1 January 1996. They can also achieve the new seniority pension by being 63 and having at least 20 years of contributions. In this case, the contributions paid must guarantee a pension amount equal to at least 2.8 times the amount of the welfare cheque.

Conversely, there are incentives for employees who continue their working lives beyond retirement age. Workers can choose to remain at work until they are 70 to increase the amount of their pensions. If a worker decides to continue working, their employer cannot dismiss them. According to Circular Letter 8 March 2012, No. 2 of the Department of Public Affairs of the Italian Presidency of the Council of Ministers, these rules do not apply to workers employed by public administrations.

Public administration reform

Legislative Decree No. 90/2014 (24 June) – converted into Legislative Decree No. 114/2014 (11 August) – abolished the right of civil servants to work beyond retirement age – the so-called 'retention in service' (trattenimento in servizio). Employees are no longer allowed to remain in service for a two-year period (five years in some cases) after reaching retirement age. Termination of public employment relationships is mandatory. Employment relationships with workers who had already reached retirement age when the law came into force were deemed concluded by 31 October 2014. Self-employment relationships – in the form of the so-called lavoro a progetto or ‘co.co.co.’ – came to an end by the same date.

A public employee's employment contract can be ended before retirement age if they have become eligible for an early seniority pension. However, public administrations cannot terminate the employment relationship before the employee is 62 and they are not obliged to terminate the employment relationships of such workers. The employee cannot challenge the administration’s decision. A six-month notice period is required. These new rules covering termination of the employment relationship also apply to managers.

Before the 1990s, the employment relationship of civil servants was regulated by administrative law. Following the so-called privatisation of public sector employment (privatizzazione del pubblico impiego), this relationship is now regulated by employment law and by provisions similar to those applicable to private sector workers. However, some public employment relationships are still subject to administrative law. Therefore, the rules outlined above do not apply to some categories of public employees such as judges and prosecutors, university lecturers and state lawyers. In these cases, termination of the employment relationship is mandatory when the person reaches the age of 70.

Section 5, paragraph 9 of Legislative Decree No. 95/2012 (6 July) – converted into Legislative Decree No. 135/2012 (7 August) – banned public administrations from giving former civil servants consultancy contracts related to the same functions and activities as they had performed during their final year of service. In fact, the ban had already been introduced by Legislative Decree No. 724/1994 (the so-called ‘1995 Budget Law’ of 23 December). However, Legislative Decree No. 95/2012 extended the provision to cover not only former public employees receiving seniority pensions, but also those receiving old-age pensions.

Legislative Decree No. 114/2014 prohibits all retirees, even those who have never worked as civil servants, from being awarded new consultancy contracts or being appointed as public managers or officials in any public administration. Ongoing consultancy contracts can continue until their expiry date. Free services are admitted for no longer than one year and are non-renewable. These bans also apply to constitutional bodies like the Parliament and the Constitutional Court.

Commentary

The Save Italy Decree modified the rules on pensions by changing pension schemes, their amounts and the requirements for accessing them. Among the various measures taken to guarantee the sustainability of the pension system, there is also the possibility to continue working until the age of 70. This favours active ageing and allows workers to increase the amount of their pensions.

However, the Department of Public Affairs of the Italian Presidency of the Council of Ministers has decided that these rules should not apply to civil servants. Public employment reform has also abolished the right to work beyond retirement age and reduced work opportunities for public sector retirees. The aim of these changes is to encourage generational change within public employment, and the government estimates that this will allow 15,000 new civil servants to be hired in the next few years.

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