Early retirement schemes : can these cushion the crisis?

The current health and economic crisis threatens companies’ business and profitability, and therefore jobs. Even so, resorting to redundancies, with the costs and hassle this gener-ates, is not inevitable. There are a number of schemes available in France to ease the transition from employment to retirement. If these are used intelligently they can cushion the effects of the crisis and help prepare for the future.

Early retirement schemes. Both employers and their staff have a vested interest.

Even in times of crisis, it is possible to combine the company’s strategic objectives and the aspirations of staff members, for example, by yanking out some early retirement schemes from the cupboard. Such arrangements offer a much less drastic solution than a redundan-cy plan for companies looking to reduce costs and staff numbers. Although redundancies can become necessary as a last resort, the social partners and the government’s regional employment offices (known as Direccte) appreciate it when efforts are made to find alterna-tives. Taking early retirement is, moreover, an opportunity to improve the age pyramid, i.e. reduce average ages across the working population, reduce the risk of sick leave and offer new prospects for younger employees. We can often see companies with more than 10% of their staff over age 58 who do not, however, make much use of early retirement schemes.

Amongst the workforce, the retirement question is often still taboo but, on the quiet, a large majority of people in France would like to finish their career earlier. Current circumstances could well accentuate this trend. According to an Opinion Way survey carried out for the Agirc-Arrco organisations (complementary, second pillar pension funds), half of those em-ployees aged between 50 and 62 feel that the health crisis is changing their view of future retirement. 70% even admit they would like to know about early retirement arrangements.

People’s individual situation must be looked at

There are a number of situations where one can benefit from early retirement: handicap, exposure to asbestos during one’s career, doing a job classed as arduous, the fact that one started work early and can claim to have had a long career, as well as a number of more specific circumstances. Taken together, these many schemes merit serious attention. They necessitate an approach based initially on education, information and scrutinising individual circumstances.

How much leverage for the company?

In the end, the employer can also take initiatives in line with their objectives. Early retire-ment schemes for companies still exist but the 50% tax on benefit payments is off-putting. Phased retirement (“la retraite progressive”) has many plus points. This can be triggered from age 60 for employees having accumulated contributions for 150 quarters. These peo-ple can cut to part time working, i.e. between 40% and 80% and claim a certain amount of their retirement pension. An employee earning 3,000 Euros net who moves on to 60% part time would receive 87% of their net salary whilst enjoying two extra days off a week.

Phased retirement costs the employer nothing. The employer can then round off the ar-rangements with a number of features that are much less expensive than redundancy or keeping the person in the job. The company can help the employee purchase quarters to build up retirement entitlement by allocating tax-free compensation paid under a Job Saving Plan (Plan de sauvegarde de l’emploi (PSE)) For higher paid employees, the advantages of this type of transaction can be impressive. A manager earning 75,000 Euros gross p.a. who retires a quarter early would save the company 28,000 Euros whilst the cost of pur-chasing a quarter does not cost more than 12,800 Euros. Other possibilities exist: crediting a Time Savings Account (“Compte épargne temps”), upfront use of allowances for going part time, etc.

Career-end is a sensitive, technical and complex issue. Particularly on a human level. It is, after all, a time for separation! But it is above all an issue that opens up a positive dialogue with the staff member and this is beneficial to all. As so often happens, it’s the first move that is the hardest…