More and more companies want to hire retirees on fixed-term contracts to retain their valuable expertise in the business. At the same time, many retirees are looking for ways to supplement their pension or stay professionally active. The legislator has now responded and significantly lowered the hurdles for such fixed-term employment relationships. What exactly has changed and what you as an employee or employer need to know now, you will learn in this article.
Why the Legislator Relaxed Fixed-Term Rules for Retirees
Demographic change does not stop at labor markets. In the next 15 years, nearly a third of today’s workforces will leave working life. This means not only pressure on social security systems, but for many companies a significant loss of experience and expertise that cannot be immediately compensated by incoming employees.
At the same time, many employees want to continue working after retirement – whether to boost their income, maintain contact with colleagues, or pass on their knowledge to the next generation. The legislator has recognized this situation and fundamentally revised the rules for employing retirees with the Act to Stabilize the Pension Level.
The New Regulation at a Glance: What Exactly Changes?
Previously, fixed-term continued employment of retirees was only possible under strict conditions. Employers had to cite a so-called objective reason for the fixed term, such as a temporary need for additional staff. In addition, the re-employment ban applied: anyone who had already been employed by the same employer could not be hired again on a fixed-term basis without an objective reason.
These hurdles have now been significantly dismantled by the legislator. The core change is the possibility to employ people of retirement age much more flexibly with fixed-term contracts than was previously possible. Concretely, this means: employers can now hire retirees on a fixed-term basis even without a special objective reason, provided the statutory requirements are met. This removes a substantial obstacle that blocked many continued employments in the past.
Fixed-Term Employment Retirees: The New Legal Situation at a Glance
The statutory basis for fixed-term employment contracts is found in the Part-Time and Fixed-Term Employment Act (TzBfG). While Section 14(1) TzBfG permits a fixed term only where an objective reason exists, Section 14(2) TzBfG enables a fixed term without an objective reason under certain conditions. For retirees, extended possibilities now apply that go beyond the general rules.
Important to understand: the new regulation concerns the fixed-term continued employment after retirement entry. Anyone who was already employed on a permanent basis before retirement and now retires cannot simply be pushed out of the employment relationship by a clause – the employment relationship ends only if there is an effective retirement exit clause in the contract or a notice of termination is given. The new facilitations apply to new contracts or for continuation after a termination.
Requirements and Limits of Fixed-Term Employment Without Objective Reason for Retirees
Even though the rules have been relaxed, limits continue to exist. A fixed term without an objective reason is not possible without any restriction. The fixed term must be agreed in writing – an oral agreement is invalid. Moreover, the fixed term must not violate mandatory statutory provisions, for example if the employee was previously employed by the same employer and the new exceptions do not apply.
The exact requirements are regulated in the statutory text of the TzBfG. In practice, employers and employees should therefore examine whether their case falls under the new facilitations. A specialist lawyer for employment law can provide valuable guidance here and ensure that the fixed term is legally secure. Anyone who is uncertain can also contact the relevant trade union or the labor chamber.
What Does This Mean for Your Employment Relationship as a Retiree?
If you want to continue working as a retiree, you now have significantly better chances of a fixed-term position. This applies both to continued employment with your previous employer and to a move to a new company. Especially for specialists with expert knowledge, new opportunities open up to pass on their knowledge while topping up their income.
The decision to be employed on a fixed-term basis as a retiree should, however, be well considered. Pay attention to the contract duration, working hours, and remuneration. Also bear in mind that with fixed-term employment you generally have no claim to severance pay upon expiry of the contract – severance is only paid in certain cases, for example in the event of a dismissal or a termination agreement. More on the topic of severance pay can be found in our severance pay guide.
Risks and Pitfalls: When the Fixed Term Can Be Invalid
A fixed term is invalid if it does not meet the statutory requirements. Typical errors are:
- Missing written form – the fixed term must be expressly agreed in the employment contract.
- Violation of the re-employment ban – if the employee was previously employed by the same employer and no exception applies.
- Missing objective reason where one is required – even though the rules have been relaxed, there are cases where an objective reason continues to be necessary.
If the fixed term is invalid, the employment relationship is deemed to have been concluded for an indefinite period. This means the employer can only terminate the employment relationship by ordinary notice. In this case, you can bring a so-called de-limitation action before the labor court. Further information on the legal steps can be found in our guide to unfair dismissal claims.
If you want to be employed on a fixed-term basis as a retiree, you should also examine whether the fixed term actually corresponds to the new rules. A frequent error is the assumption that every fixed term after retirement entry is automatically permissible – that is not the case. Only if the requirements of the TzBfG are met is the fixed term valid.
Your Rights in Fixed-Term Continued Employment After Retirement Entry
As a retiree employed on a fixed-term basis, you have in principle the same rights as any other employee. These include the claim to continued remuneration in case of illness, vacation entitlements, and protection against discrimination. The Working Hours Act and occupational health and safety also apply without restriction.
An important difference from permanent employment: protection against dismissal applies only to a limited extent for fixed-term contracts. During the term, the employer can terminate the employment relationship only extraordinarily, i.e., for good cause. After expiry of the fixed term, the employment relationship ends automatically, without a notice of termination being required. Severance pay is not automatically due to you in this case – it would have to be contractually agreed or determined in a settlement before the labor court.
If you believe your fixed term is invalid, you should act quickly. The action period is generally three weeks after receipt of the written notification of the fixed term. If you miss this deadline, the fixed term can no longer be challenged. In this context, litigation funding can also help if you cannot afford the labor court proceedings yourself. RechtStark examines on request whether financing of your proceedings is possible.
Conclusion: Use Flexibility, But Know Your Rights
The new legal situation makes it easier for employers to employ retirees on a fixed-term basis and offers retirees attractive opportunities to remain active. Yet as with all employment law questions, the same applies: inform yourself well and seek legal advice in case of doubt. Only those who know their rights can enforce them. Use the new flexibility, but ensure your employment contract is legally sound.
Note: This article is for general information purposes only and does not replace individual legal advice. For a free initial assessment of whether litigation funding may be an option for your case, you can contact RechtStark.