Altersteilzeit – Germany's gradual early retirement scheme – allows employees aged 55 and over to reduce their working hours to 50% and transition smoothly into retirement. The framework is set out in the Altersteilzeitgesetz (AltTZG, Gradual Early Retirement Act): the employer pays a top-up on the reduced salary and makes additional pension insurance contributions. There are two fundamental models – the block model (Blockmodell) and the equal distribution model (Gleichverteilungsmodell).
What is Altersteilzeit?
Altersteilzeit (ATZ) is a statutory working-time arrangement that allows older employees to wind down their working life gradually. Its legal basis is the Altersteilzeitgesetz (AltTZG), which came into force in 1996 and has been amended several times since.
The core principle: working hours are reduced to half of the employee's previous standard hours. To keep the model financially attractive, the employer is required to top up the salary to at least 80% of the employee's previous net standard pay (the Aufstockungsbetrag, or top-up amount). In addition, the employer pays enhanced pension insurance contributions calculated on the basis of 80% of the full-time gross salary (pursuant to § 3 AltTZG).
Altersteilzeit is not early retirement: employees remain in compulsory social insurance employment and continue to accrue pension entitlements – albeit at a reduced rate.
Eligibility Requirements
Requirements for Employees
According to § 2 AltTZG, the following conditions must be met:
- Minimum age: 55 years
- Employment history: At least 1,080 calendar days (approx. 3 years) of compulsory social insurance employment in the 5 years prior to the start of the arrangement
- Working-time reduction: To 50% of previous standard hours
Requirements Relating to the Employment Relationship
- The employment contract must be open-ended or of indefinite duration
- Employer and employee conclude a written Altersteilzeit agreement
- There is no statutory entitlement to Altersteilzeit – unless a collective agreement (Tarifvertrag) or workplace agreement (Betriebsvereinbarung) provides one (e.g. in the public sector under TVöD)
Employers may refuse an Altersteilzeit request on operational grounds – for instance, if the position cannot be refilled. The General Equal Treatment Act (AGG) must be observed: a refusal must not be discriminatory.
The Two Models Compared
The Block Model (Blockmodell)
In the block model, the total duration of the arrangement is divided into two equal phases:
- Active phase (Aktivphase): The employee works full hours (100% of standard hours) and accumulates a working-time credit
- Release phase (Passivphase / Freistellungsphase): The employee is fully released from work but continues to receive the topped-up part-time salary
Example – Block Model (6 years, gross salary €4,000):
The block model is popular with employees because they can use the release phase as an extended pre-retirement period. For employers, however, it requires planning: the accumulated working-time credit must be protected against insolvency (§ 7e SGB IV).
The Equal Distribution Model (Gleichverteilungsmodell)
In the equal distribution model, working hours are reduced evenly to 50% throughout the entire duration – with no phase separation.
Example – Equal Distribution Model (6 years, gross salary €4,000):
- Working hours: continuously 50% (e.g. 20 hours/week)
- Gross pay: €2,000 + top-up €400 = €2,400 per month
The equal distribution model is administratively simpler and particularly suitable when employees are expected to pass on their knowledge gradually to their successors.
At a Glance
Top-Up Amount and Pension Insurance Contributions
What Does the Employer Pay – and How Much?
The employer is obligated to provide two additional benefits (§ 3 AltTZG):
- Top-up amount (Aufstockungsbetrag): At least 20% of the part-time gross pay, so that the total pay reaches at least 80% of the employee's previous net standard pay. In practice, many companies agree on higher top-ups (up to 90% of net pay), often governed by collective agreement.
- Additional pension insurance contributions: Based on at least 80% of the full-time gross salary. This at least partially offsets the pension gap resulting from the reduced working hours.
Total costs for employers: Typically around 70–80% of the original gross salary – plus the proportionate social insurance contributions.
Impact on the Employee's Future Pension
Thanks to the enhanced pension insurance contributions (calculated on 80% of full-time pay), the pension gap under Altersteilzeit is smaller than with a standard part-time arrangement. Nevertheless, employees should obtain an individual pension projection from the Deutsche Rentenversicherung (German Pension Insurance) at an early stage to understand the precise impact on their future pension.
Altersteilzeit from the Employer's Perspective
Rights and Obligations
Under the block model, employers are legally required to invest the accumulated working-time credit in insolvency-proof assets (§ 7e SGB IV) – for example via trust arrangements or bank guarantees. Failure to comply may result in fines and liability risks.
Important: Altersteilzeit agreements must be concluded in writing and must contain clear provisions on the model chosen, duration, top-up amount and pension insurance contributions.
Succession Planning as a Strategic Opportunity
Altersteilzeit gives HR managers an opportunity to manage knowledge transfer proactively. The equal distribution model in particular allows experienced employees to work alongside new colleagues during a transitional period. This reduces knowledge loss and supports the onboarding of new staff.
A well-conceived Altersteilzeit strategy also signals a commitment to employee retention and employer branding: companies that enable older employees to transition into retirement with dignity strengthen their employer brand.
Checklist for HR Professionals
- Review collective agreement or workplace agreement for Altersteilzeit provisions
- Draft the Altersteilzeit agreement in writing (model, duration, top-up, pension contributions)
- Ensure insolvency protection for accumulated working-time credit (block model only)
- File social insurance notifications correctly
- Initiate succession planning and knowledge transfer early
- Recommend an individual pension projection for the employee (Deutsche Rentenversicherung)
- Adjust payroll processing for Altersteilzeit-specific requirements
Frequently Asked Questions about Altersteilzeit
What is Altersteilzeit?
Altersteilzeit is a statutory working-time arrangement under the AltTZG that allows employees aged 55 and over to reduce their working hours to 50% and transition gradually into retirement. The employer pays a top-up of at least 20% of the part-time gross pay and makes enhanced pension insurance contributions.
Is there a statutory entitlement to Altersteilzeit?
No – there is no statutory right to Altersteilzeit. Employers may refuse the arrangement on operational grounds. Exception: many collective agreements (e.g. TVöD in the public sector) do provide an entitlement. Workplace agreements may also contain corresponding provisions.
What are the eligibility requirements for Altersteilzeit?
Under § 2 AltTZG, the employee must be at least 55 years old and must have been in compulsory social insurance employment for at least 1,080 calendar days in the five years preceding the start of the arrangement. Working hours are reduced to 50% of previous standard hours.
What is the difference between the block model and the equal distribution model?
In the block model, the duration is divided into an active phase (full working hours) and a release phase (full release from work). In the equal distribution model, employees work at a continuously reduced level of 50% throughout the entire period – with no phase separation. The block model is more popular with employees (earlier release from work); the equal distribution model is simpler to manage for employers.
What does the employer pay under Altersteilzeit?
The employer pays a top-up of at least 20% of the part-time gross pay and additional pension insurance contributions based on 80% of the full-time gross salary (§ 3 AltTZG). Total employer costs are typically around 70–80% of the original gross salary.
Can the employer refuse an Altersteilzeit request?
Yes – without a collective agreement or workplace agreement, a refusal on operational grounds is permissible (e.g. if the position cannot be refilled). The refusal must not, however, be discriminatory (AGG).
What happens if the employee falls ill during Altersteilzeit?
Under the equal distribution model, the standard statutory sick pay obligation applies (6 weeks). Once statutory sickness benefit (Krankengeld) kicks in, the top-up amount generally ceases. Under the block model, the release phase is not normally interrupted by illness. Detailed questions should be clarified with the relevant health insurance fund.
How does Altersteilzeit affect the employee's pension?
The employer pays pension insurance contributions based on 80% of the full-time gross salary (§ 3 AltTZG). This reduces the pension gap compared with a standard part-time arrangement. However, some reduction compared with full-time employment remains. An individual pension projection from Deutsche Rentenversicherung is strongly recommended.
Conclusion
Altersteilzeit is a well-established instrument for enabling older employees to transition into retirement on a socially acceptable basis – while also giving employers planning certainty for succession. The choice between the block model and the equal distribution model depends on the needs of both parties: those prioritising knowledge transfer will opt for the equal distribution model; those aiming to relieve employees of work duties early will more often choose the block model.
HR professionals should draft Altersteilzeit agreements carefully, comply with insolvency protection obligations and communicate the process at an early stage – both to ensure legal certainty and as a signal of an appreciative organisational culture.
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Sources
- Altersteilzeitgesetz (AltTZG) – full text. Federal Ministry of Justice, 2024. https://www.gesetze-im-internet.de/alttzbeschg/
- SGB VI – Statutory Pension Insurance (§§ 3, 187a). Federal Ministry of Justice, 2024. https://www.gesetze-im-internet.de/sgb_6/
- Information leaflet: Altersteilzeit for employers. Bundesagentur für Arbeit, 2024. https://www.arbeitsagentur.de/unternehmen/personalfragen/altersteilzeit
- Information on Altersteilzeit. Federal Ministry of Labour and Social Affairs (BMAS), 2024. https://www.bmas.de/DE/Arbeit/Arbeitsrecht/Arbeitnehmerrechte/altersteilzeit.html
- Pension information and Altersteilzeit. Deutsche Rentenversicherung, 2024. https://www.deutsche-rentenversicherung.de
- Altersteilzeit kompakt – HR practical knowledge. Haufe Verlag, 2024. https://www.haufe.de/personal/haufe-personal-office-platin/altersteilzeit
- HR Lexicon: Altersteilzeit. Personio GmbH, 2024. https://www.personio.de/hr-lexikon/altersteilzeit/
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