Many companies have been using the block model of partial retirement for years as a tried-and-tested tool for socially responsible staff reductions. This could soon change fundamentally. On 2 July 2026, the coalition committee agreed, on the recommendation of the Pension Security Commission, to abolish the block model of partial retirement. At the same time, the age limit for the remaining period of partial retirement is to be raised from 55 to 58 and, in future, linked to the standard retirement age.
Block model and uniform distribution model: The difference
Under the ‘block model’ of partial retirement, employees initially continue to work full-time or for the most part during one phase of their employment, and then move into a leave-of-absence phase of equal duration before retiring. Legally speaking, this constitutes partial retirement, not early retirement. The model provides planning certainty for both parties and is particularly popular during restructuring processes, as staff reductions can be implemented in a clear and predictable manner.
Under the reform plans, only the so-called ‘equal distribution model’ will be permitted in future. Under this model, working hours are reduced evenly over the entire period. Employees therefore remain with the company for the entire duration, which significantly slows down staff reductions and is only of limited use for restructuring.
Will this result in more redundancies for operational reasons?
Critics of the reform see significant implications for workplace practice. This is because the need for restructuring within companies will not disappear simply because the ‘block model’ is abolished. Employers may then have to resort more frequently to mutual termination agreements or redundancies on operational grounds in order to reduce surplus staff. Whether this will actually lead to older workers remaining in the labour force for longer, as the Commission expects, remains to be seen. It is equally conceivable that there will be higher unemployment among those approaching retirement age and more disputes during restructuring processes.
Impact on the social selection process
The reform would have particular implications for the social selection process under the Protection Against Dismissal Act. Older employees with long service are generally particularly well protected under the points-based schemes used for social selection. Until now, such employees have been able to voluntarily transition to partial retirement, which reduced their numbers in the comparison groups in the event of redundancies. Without this option, more older employees will remain in the comparison groups, which may mean that employers are forced to make more younger staff redundant.
This could prompt companies to make greater use of age-based groups in order to safeguard the age structure of the workforce. Furthermore, pressure is likely to increase to exclude certain employees from the redundancy selection process on the grounds of their specific knowledge or skills. This will not only make the redundancy selection process more complex, but also more prone to disputes.
Protection of legitimate expectations in respect of existing agreements
Many companies and employees have already based their planning on existing partial retirement schemes. Should the ‘block model’ be abolished, the legislator would need to provide for comprehensive transitional arrangements. This applies both to partial retirement agreements that have already been concluded and to ongoing restructuring plans in which partial retirement is firmly incorporated.
For companies that are currently in the planning stages or already have existing agreements in place, it is advisable to seek advice on employment law at an early stage in order to keep abreast of further developments and to consider options for action in good time.
Source: Haufe: Human Resources
This post and the accompanying image were created with the help of AI and have been editorially reviewed.
