Employment of full pensioners: what employers should know!

Employing full pensioners is a good way for employers to fill staffing gaps in times of a shortage of skilled workers and general staff shortages. In particular, the use of full pensioners is relatively uncomplicated for employers: in many respects it is no different from the use of non-pensioners, and in some cases there are even advantages.

But what do employers need to be aware of with regard to social security issues? And what opportunities are offered, for example, by continuing an existing employment relationship beyond retirement age?

Labor law: the employment of full pensioners

Before going into details on the topic of “employment of full pensioners”, one thing should be noted first: Labor law does not, in principle, make any distinctions based on an employee’s age. If an employee is of full age, it is initially irrelevant for the rights of the employee and the employer – from the point of view of labor law – how old an employee is. Therefore, all essential regulations of labor law apply to employees of any age, such as the

• Dismissal Protection Act (KSchG)
• Continuation of Remuneration Act (EFZG) for continued payment of remuneration in the event of illness
• Federal Vacation Act (BUrlG) or also the
• Minimum Wage Act (MiLoG)

However, exceptions confirm the rule here as well: in some cases, general labor laws contain special provisions for the employment of full pensioners after reaching the standard age limit, e.g. on the subject of fixed-term contracts in the Part-Time and Fixed-term Contract Act (TzBfG) or in SGB VI.

Social security law: Employment of full pensioners after reaching the standard retirement age

Especially when it comes to issues of social security law, there may be deviations in the employment of full pensioners after reaching the standard retirement age compared to the employment of “non-pensioners”.

Depending on the type of employment of full pensioners, other regulations may apply, e.g. for the obligation to contribute to health insurance, long-term care insurance, pension insurance and unemployment insurance. Whether and which differences exist depends primarily on the type of employment, i.e. whether it is a marginal employment (“mini-job”) or a full-time or part-time employment relationship subject to social insurance contributions.

Important. As is the case with employees before reaching the age limit, employers are also obliged to declare employment subject to social insurance and to pay the contributions correctly when employing pensioners!

What rules apply to the employment of pensioners in mini-jobs?

Mini-jobs in particular are popular among retirees as a way to supplement their own pensions.

Notice. Retirees – like all employees – have the option of working in a mini-job with a monthly earnings limit of max. 520 euros (“520-euro job”) or without an earnings limit for 3 months per year and a maximum of 70 working days per year.

If employers employ full pensioners after they have reached the standard retirement age within the framework of a mini-job, the following applies under social insurance law:

• The employer does not have to pay contributions to unemployment insurance and contributions to long-term care insurance.
• Flat-rate contributions to pension insurance must be paid at a rate of 15%.
• Flat-rate health insurance contributions of 13% must be paid.

Notice. As in all other cases of mini-jobs, the employer is also obliged to pay 2% flat-rate wage tax.

What rules apply to a job subject to social security contributions (full-time/part-time)?

Now that there are no additional earnings limits for the majority of all full pensioners after they reach the standard retirement age, it is becoming increasingly interesting for pensioners not only to take on a mini-job, but also to take on a part-time or full-time position.

Attention. Supplementary income limits still apply to some pensioners, e.g. retired civil servants, persons receiving a reduced earning capacity pension or survivor’s pension, and in the case of miners’ compensation. Employers should advise applicants in such cases so that applicants are not later surprised by pension reductions because of employment.

If an employer hires a full pensioner or regular pensioner, the following rules apply with regard to social insurance obligations:

Health insurance and long-term care insurance

As long as regular pensioners draw a pension and are not gainfully employed, they are covered by statutory health insurance. As soon as they start part-time or full-time employment that is subject to social insurance contributions, this changes: the employer must register the employment relationship and pay regular contributions to health insurance and long-term care insurance, just like for any other employee.

Pension insurance

If employers employ regular pensioners with a full pension entitlement on a part-time or full-time basis, employers must pay the full employer’s contribution to the pension insurance scheme. This contribution has no effect on the pension of the employed pensioner – it is a real solidarity contribution to the pension system.

Notice. Here, too, you can do employees a favor with a hint: employed full pensioners do not have to pay a contribution to the pension insurance. However, they can do so voluntarily and thus supplement their pension entitlement somewhat (so-called flexi pension).

Unemployment insurance

As with pension insurance, the following also applies to unemployment insurance: if you as an employer employ a full pensioner or standard-age pensioner, you must pay the full employer’s contribution – this is expressly stipulated in Section 346 (3) SGB III. Here, too, the employed pensioner does not have to pay any contributions.

Temporary continuation of employment contract beyond retirement age?

At the beginning of this article, we discussed the fact that labor law applies to employees who have reached the age of majority, irrespective of their age. However, there is an exception or a special regulation in connection with the employment of regular-age retirees that is of great interest to employers: Under certain conditions, labor law or social law permits a kind of fixed-term continuation of an existing employment contract – even if there is no material reason! This is because the end of an employment relationship due to reaching the retirement age can be postponed according to § 41 sentence 3 SGB VI.

Concerns about legal admissibility?

When this regulation was introduced in the law, there were some concerns as to whether this possibility of a fixed-term contract without an objective reason violated applicable European law. However, fundamental concerns about this model have been dispelled by the European Court of Justice (ECJ) in a ruling (ECJ, ruling dated February 28, 2018, Ref.: C-46/17): the multiple fixed-term extension of termination (“chain fixed-term”) is permissible if there is no abuse of rights, the previous conditions of the employment relationship remain as unchanged as possible, and the fixed-term is justified in itself because the employee is covered by his or her pension.

Don’t be inhibited!

As I said at the beginning: employing full pensioners is an exciting thing for employers in view of the current labor market situation. At the same time, in times of inflation and small pensions, employing full retirees is a good way for retirees to supplement their pensions. So it’s a real win-win situation.

From the point of view of labor law and social security, it should also be said that employment is in itself uncomplicated, whether in the context of a mini-job or part-time or full-time employment. This is because it differs only marginally from the employment of a normal employee (non-pensioner).

And especially with regard to a temporary continuation of employment of a long-term employee beyond the statutory retirement age, the employment of full pensioners even offers employers additional, flexible options.