Agreement on partial retirement in metal and electrical industry

In September 2008, the employer association for the metal and electrical industry in Baden-Württemberg and the German Metalworkers’ Union negotiated a new collective agreement on partial retirement covering about 800,000 employees in the region. The new agreement will take effect on 1 January 2010 and cannot be cancelled before 31 January 2016. The accord entitles up to 4% of employees in metal and electrical establishments in Baden-Württemberg to partial retirement under certain circumstances.

On 3 September 2008, the employer association for the metal and electrical industry in Baden-Württemberg (Verband der Metall- und Elektorindustrie Baden-Württemberg, Südwestmetall) and the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall) agreed on a new collective agreement on partial retirement. The agreement covers about 800,000 employees in the Land (region) of Baden-Württemberg in southwest Germany. It will come into effect on 1 January 2010 and cannot be cancelled for the first time before 31 January 2016.

Partial retirement has been on the agenda since the federal government proposed to raise the statutory retirement age from 65 to 67 years and after incentives for partial retirement were reduced (DE0612039I, DE0702019I).

Content of new agreement

The agreement foresees two partial retirement schemes (in German, 83Kb PDF).

First scheme

The first scheme sets out the general condition for partial retirement entitlement: employees aged 61 years or over who have worked at their company for at least 12 years can benefit from partial retirement. The age threshold will be gradually raised in line with the statutory retirement age. These employees can retire partially for a maximum of four years, a period which must end at the earliest possible date on which these employees gain unrestricted access to their statutory pension. No compensation payments will be made by employers. The new agreement makes this provision available to a maximum of 2.5% of all employees in an establishment.

Second scheme

The second scheme lays down special regulations for employees who work under difficult conditions. Special entitlement to partial retirement is granted to employees who:

  • regularly worked three or more shifts – including night shifts or only night shifts – within the last nine years;
  • worked rotating shifts for at least 12 years within the last 15 years;
  • worked under unfavourable environmental conditions – such as exposure to loud noise, or gas or dust.

Furthermore, employees using their special entitlement have to be at least 57 years of age and must have worked for their company for at least 12 years. They are allowed a maximum of six years in partial retirement, and this period can end before they gain access to their statutory pension scheme. In this case, employers will compensate them for their lost earnings at the rate of €250 a month for a maximum of 24 months.

Further provisions

It should be noted that up to 2.5% of the staff in a given establishment can take advantage of the aforementioned special partial retirement scheme. However, the total number of employees taking up their general or special entitlement to retire early must not exceed the 4% threshold. Moreover, the agreement stipulates special regulations if quotas for general and special entitlement are exploited at the establishment level.

Employees in partial retirement will receive 85% to 89% of their former net income. Additionally, contributions to the statutory pension scheme will be paid on 95% of employees’ former income.

Situation regarding existing agreements

While the new agreement on partial retirement in the metal and electrical industry in Baden-Württemberg will take effect on 1 January 2010, existing company agreements on partial retirement will not lose their validity on this date. However, these company agreements can be renegotiated by the works council and the management. In such cases, new arrangements are not to fall short of the terms laid down in the aforementioned sectoral collective agreement. If a company or an establishment does not want to offer any partial retirement schemes, it must negotiate an appropriate solution with its work council.

Position of social partners

The Chair of Südwestmetall, Jan Roell, welcomed the new agreement in a press statement (in German) issued on 3 September 2008. Mr Roell highlighted the fact that older employees working under difficult conditions would still be entitled to partial retirement. At the same time, the incentives for other employees to retire partially had been reduced. He outlined that the new agreement would ensure that more older employees continued to work and thus countered the main problem deriving from an ageing society – that is, the lack of skilled employees at company level.

On the same day, a representative of IG Metall, Jörg Hoffmann, also expressed confidence in the compromise in a statement (in German) published on the union’s website. Mr Hoffmann emphasised that IG Metall had attained its most important goal – that is, to safeguard employees’ entitlement to partial retirement. He added that the new agreement was a milestone for both older employees and young professionals. Mr Hoffmann also highlighted that the new agreement had only been concluded after a long and determined struggle between the social partners. The final breakthrough was as a result of the dedicated work of the employee and employer representatives.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

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