Progressive early retirement
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Progressive early retirement is a social welfare tool whereby an employer can offer their employees the option of gradually reducing their working hours.
When an employee agrees to have their full-time position turned into a part-time one, the reduction in working hours frees up a position in the company, which may be filled by a jobseeker registered with the National Employment Agency (Agence pour le développement de l'emploi - ADEM).
Early retirement should not be confused with an early old-age pension: old-age pension falls within the scope of pension insurance, while early retirement, limited to a term of 3 years, is a mechanism to prevent unemployment. Early retirement is therefore considered as insurance years that count toward the old-age pension.
Who is concerned
Any private-sector employee aged 57 or over can apply for early retirement and the payment of an early retirement benefit, on condition that:
- they have been employed for at least 5 years and in a full-time position for at least 75 % of that time in a business which is eligible for progressive early retirement, and
- they will become eligible for a legal pension no later than 3 years after the start of their early retirement benefits.
Progressive early retirement is only available to employees of a business which has been declared eligible for the scheme under an express stipulation in a collective labour agreement or a special agreement entered into with the Minister for Employment and a specific business, or not covered by a collective agreement, or covered by a collective agreement applicable to the field of activity which does not provide for progressive early retirement.
Entering into the special agreement mentioned above is subject to the approval of the competent employee representative body.
Acceptance for progressive early retirement is an acquired right for employees covered by a collective agreement which provides for progressive early retirement. For other employees, the employer's approval must be sought.
Prerequisites
To qualify for progressive early retirement, the employee must:
- be at least 57;
- have been employed for at least 5 years and in a full-time position for at least 75 % of that time in a business which is eligible for progressive early retirement;
- be eligible to receive an old-age pension, or an early old-age pension, no later than 3 years after taking early retirement.
Deadlines
An employee who wishes to apply for progressive early retirement 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 progressive early retirement
Progressive early retirement promotes job rotation: it allows an older employee to work part time and the employer to take on a jobseeker registered at the ADEM.
An employee who wishes to take progressive early retirement must agree to have their full-time job converted to a part-time position.
The percentage of time worked may vary depending on the agreement between employee and employer. However, for an employee granted progressive early retirement, the duration of part-time work must be equal to at least 40 % and at most 60 % of their full-time hours.
The reduction in working hours may be implemented progressively. Where applicable, the percentage of time worked by the employee may be reduced from, for instance, 60 % to 50 %, and then to 40 % of their previous work hours.
Conditions for the Employment Fund to reimburse the employer for the early retirement allowance they have paid
The Employment Fund will reimburse the employer for all of the costs and charges in relation to the payment of the progressive early retirement allowance, including the employer's share of the relevant social contributions, on condition that the employer can prove that they have actually hired, under the terms of a permanent employment contract (either full time or part time) or a training contract:
- one or more jobseekers on benefits who have been registered for at least 3 months with ADEM and referred to the employer by the latter. At the recommendation of ADEM, the Minister for Employment may decide to take into consideration, in determining the contribution of the Employment Fund, the recruitment of jobseekers who have been registered with ADEM for only 1 month minimum;
- one or more employees whose fixed-term employment contract has been converted into a permanent one within 6 months either side of the granting of early retirement. This, however, carries the condition that the fixed-term contract was entered into after a period of at least 3 months claiming benefits as a jobseeker registered with ADEM;
- one or more unemployed jobseekers benefiting from an employment measure (professionalisation training contract, employment reintegration contract, employment support contract, employment initiation contract);
- one or more employees from a company that has concluded a job protection plan;
- one or more employees from a bankrupt business or one undergoing compulsory liquidation;
- one or more employees or apprentices from a business facing economic or structural difficulties and who are at risk of imminent dismissal.
Hires within the 6 months either side of the granting of early retirement may be taken into consideration. When the compensating hire is made by means of an apprenticeship contract, the aforementioned period of 6 months is deferred until the beginning of the academic year following the start of the early retirement.
For the employer to be entitled to reimbursement from the Employment Fund, both the full-time employee having taken progressive early retirement and the employee or apprentice hired to replace them, or another job seeker, must be kept in the employer's company for at least two years after the end of the early retirement period.
Filing an application
An employee applying for progressive early retirement must submit a written request to their employer at the latest 3 months before the projected date of early retirement.
Their application should be accompanied by a certificate issued by the competent social security bodies establishing the date they became eligible for old-age pension or early old-age pension.
Once the projected date of early retirement is establishment, the employee's declaration of enrolment with social security must be updated to reflect the reduction of working time. A new declaration of enrolment must also be made when the employee actually takes their early retirement.
Amount of the early retirement allowance
The amount of the progressive early retirement allowance is adjusted proportionally to the reduction in the employee's working hours.
Who to contact
Early Retirement Office
-
Ministry of Labour Early Retirement Office
- Address:
- 26, rue Zithe L-2763 Luxembourg Luxembourg
- Phone:
- (+352) 247 86 116
- Phone:
- (+352) 247 86 189
- Fax:
- (+352) 247 86 325
- Email address:
- preretraite@mt.etat.lu
- Website:
- https://mt.gouvernement.lu/en.html
