Applying for early retirement for job creation

From 1 July 2018, the early retirement under the solidarity scheme (préretraite-solidarité) will be repealed. From this date, it will therefore no longer be possible to include the early retirement under the solidarity scheme in collective agreements or to look for an arrangement with the Ministry in order to make possible early retirements under this scheme.

The last retirements under this scheme may in principle take place on 1 June 2018 at the latest.

However, businesses with collective agreements concluded before 30 June 2018 inclusive which contain the early retirement under the solidarity scheme, can continue to offer this early retirement scheme until the end date of the collective agreement. Employees under these collective agreements can therefore continue to benefit from early retirement under the solidarity scheme until the end date of the collective agreement.

Moreover, businesses that have concluded an individual agreement with the Ministry responsible for employment before 30 June 2018 inclusive, can continue to apply the right to early retirement under the solidarity scheme for their employees for a maximum period of 2 years from the date of signature of the agreement.

It should be noted that in any case, the choice between early retirement and early old-age pension ceases on the day before the 60th birthday of the employees receiving the allowance for early retirement under the solidarity scheme.

Early retirement for job creation is a social provision that allows employees to ask their employer to consent to the termination of their employment contract and receive an early retirement allowance under certain conditions. The purpose of early retirement for job creation is to prevent unemployment by means of job-placement measures.

When an employee's employment contract is terminated to allow them to go on early retirement, their departure opens up a place in the company. This type of early retirement facilitates the placement of unemployed persons, apprentices or persons at risk of losing their jobs, who can replace employees taking early retirement.

Early retirement should not be confused with an early old age pension: old age pension relates to pension insurance, while early retirement—which is limited to 3 years—constitutes a mechanism to promote solidarity between generations and prevent unemployment. Early retirement is therefore considered as insurance years that count toward the old-age pension.

Law of 30 November 2017 amending the legislation on early retirement

Who is concerned

All private sector employees aged 57 years old may claim their right to early retirement by entering into a special and individual agreement with their employer through which the employer consents to terminate the employment contract and pay the employee an early retirement allowance.

Access to early retirement for job creation is reserved for employees of companies that have gained eligibility to grant early retirement for job creation through a collective labour agreement or an agreement signed between the employer and the Minister of Labour and Employment. Entitlement to early retirement is thus not a vested right of the employee.

For further information, contact the Ministry of Labour, Employment and the Social and Solidarity Economy ( Ministère du Travail, de l'Emploi et de l'Economie sociale et solidaire), Department in charge of early retirement either by telephone (247-86115, morning only) or fax (247-86325).

Prerequisites

To qualify for early retirement for job creation, the employee must:

  • have turned 57;
  • be eligible to receive an old age pension, or an early old age pension, no later than 3 years after taking early retirement;
  • on penalty of losing the right to the early retirement allowance, commit to not engaging in a paid activity which exceeds (per month) one half of the applicable social minimum wage in a calendar year.

Deadlines

An employee who wishes to apply for early retirement for job creation must submit a written request to their employer no later than 3 months before the presumed date of early retirement.

How to proceed

Specific features of early retirement for job creation

Employees in the private sector can claim their right to early retirement for job creation if they are employed in an enterprise that is eligible to grant early retirement for job creation by virtue of a specific provision in a collective labour agreement—which provision must be approved by the Minister responsible for Labour—or by virtue of an agreement between that Minister and a given company that is either not covered by a collective labour agreement, or is covered by a collective agreement that is applicable to the branch of activity which does not provide for early retirement for job creation.

However, the right to early retirement for job creation is not a vested right as the employer's consent is required in the form of a special and individual agreement to terminate the employment contract and pay out an early retirement allowance.

If an employer wishes to obtain a financial contribution from the State for the payment of the early retirement for job creation allowance, they must satisfy the condition requiring compensatory employment of one or more jobseekers that have been assigned to them by the placement services of the National Employment Agency (Agence pour le développement de l'emploi – ADEM), or of an employee from a company undergoing structural difficulties who is exposed to an immediate risk of dismissal for economic reasons. The replacement hire can also be made through an apprenticeship contract.

Compensatory hiring can take place up to 6 months before the admission to early retirement—with the aim of inducting the employee hired to the position vacated by the employee admitted to early retirement—and up to 4 months after the admission to early retirement. If an apprentice is hired, the hiring period is extended to the beginning of the apprenticeship school year preceding the start of early retirement, and to the beginning of the apprenticeship school year following the departure.

The law does not require the replacement to be made on a position-for-position basis, but rather number-for-number basis. As a result, the hired employee does not necessarily have to take up the job vacated by the employee who has been admitted to early retirement for job creation. If need be, they can be assigned to another job made available as a result of the sequence of transfers or reassignments caused by the position being vacated.

Procedure

  1. An employee who wishes to apply for early retirement for job creation submits a written request to their employer no later than 3 months before the presumed date of early retirement.
  2. They attach to their application a certificate issued by the competent social security bodies establishing the date on which they will become eligible for old-age pension or early retirement pension.
  3. The employer sends a copy of the application to the main employee representative delegation in the employee's place of work.
  4. The collective agreement or the agreement entered into by the Minister responsible for Labour and a given company not covered by a collective agreement, or covered by a collective agreement which applies to a branch of activity which does not provide for application of early retirement for job creation, establishes the priority criteria for admission to early retirement. Otherwise, it is the employer who establishes these criteria, after having consulted the competent employee representative delegation(s), when it employs fewer than 150 employees, or by mutual agreement between the employee representative delegation(s), when it employs at least 150 employees. Employees with at least 480 months of work, substantiated by their compulsory registration for pension insurance, are given top absolute priority.
  5. If accepted for early retirement, the end of the normal working relationship is documented with an exit declaration issued by the employer and sent to the Joint Social Security Centre (Centre commun de la sécurité sociale - CCSS). In this declaration, the employer indicates "early retirement" as the reason for the worker's departure.

Amount of the early retirement allowance

The monthly early retirement allowance is calculated using the gross monthly remuneration effectively received by the employee in the 3 months immediately preceding the benefit period. The early retirement allowance must be calculated with respect to a 12-month reference period for the variable portion of the compensation, when this method of calculation is more favourable for the employee. The reference compensation that is used to calculate the monthly early retirement allowance must include any sickness allowance payments, as well as current supplements and premiums, but not compensation for overtime or any allowances for additional costs incurred.

Bonuses and thirteenth-month payments accrue at a rate of one twelfth per month.

The early retirement allowance may not exceed the monthly ceiling for pension insurance contributions (which amounts to 5 times the social minimum wage).

As the duration of early retirement cannot exceed 3 years, the payment is spread out over this time period with a progressive annual decrease. Therefore, the early retirement allowance is equivalent to:

  • 85 % of the gross monthly compensation received by the employee in the 3 months immediately preceding the payment period, for a first 12-month period;
  • 80 % of this compensation for a second 12-month period;
  • 75 % of this compensation for the period remaining until the day when the right to the allowance ends.

The early retirement allowance must be adjusted to changes in the cost of living, pursuant to the provisions of Article 11, paragraph (1) of the amended law of 22 June 1963 establishing the compensation scheme for civil servants.

Financing

The early retirement allowance is paid to the employee by their employer. The Employment Fund reimburses the employer for 70 % of the expenses resulting from the payment of the early retirement for job creation allowance, including the employer's share of the social security contributions relating to the allowance, if the legal conditions for the financial contribution of the Employment Fund (such as compensatory hiring) are met.

Who to contact

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