Employing retirees for a short time in specific circumstances is increasingly common in German workplaces. But what conditions apply for employers wishing to employ retirement age workers on fixed-term contracts?

The lack of skilled workers, employers’ wish to be able to fall back on the experience and knowledge of retirement age employees, but also shrinking pension payments and the rise in the cost of living have created both a necessity and a mutual desire for older workers to continue working, despite reaching standard retirement age, or even to ‘revoke their retirement’.

But how can employers employ pensioners if it is not possible to postpone their retirement date according to s41 sentence 3 Social Code VI (‘SGB VI’) because of necessary changes in working conditions? And what if the employment relationship has already ended and the pensioners would be returning to the company? The answers can be found in the Part-time and Fixed-term Act (‘TzBfG’).

A time limit on factual grounds under s14(1) TzBfG

The factual reasons for a fixed-term contract justifying temporary employment, including that of retirement-age employees, are set out in s14(1) TzBfG. If one of the reasons listed applies with regards to the employment of a retired person, it is up to the contracting parties to regulate the working conditions relevant to employment. In particular, they are not bound by the terms of the previous employment contract.

Common reasons for a time limited contract

Temporary need for workforce (s14(1), Reason 1)

A time limit is only allowed if there is a temporary operational need for the work. Classic examples include seasonal work, sales or processing work before company closures. A so-called ‘time-limited project’ (e.g. a temporary research project) will also fall under this reason. A forecast must used to determine whether there is a temporary need for work. In other words, it must be sufficiently certain at the time the contract is concluded that there will be no further need for the employee's work beyond the agreed end of the contract.

Substitution (s14(1), Reason 3)

If the employee is hired to temporarily replace another employee, this can be a permissible reason for a time limit on his or her employment. This can include filling in for employees who are on long-term sick leave or parents on maternity leave or parental leave, but also for employees absent on sabbaticals, which are becoming more and more popular.

A fixed term at the employee's request (s14(1) Reason 6)

A time limited contract is also permissible if requested by an employee. Since the Federal Labour Court (´BAG´) requires that the employee's request for this fixed-term reason relates precisely to the fixed-term requirement, this justification is usually rarely available, but it might be different for employees of retirement age. They are often happy to ‘enjoy’ their pension and would not want to enter into an unlimited employment relationship unintentionally just because they promised their former employer to step in at short notice.

In these circumstances, it is quite possible to argue that the employee would have chosen a fixed-term contract even if he or she had been offered a permanent contract. This argument applies in particular in cases where a long notice period does not allow for the flexibility to end the employment relationship.

Termination without an objective reason under s14(2) TzBfG

In principle, a time limit without factual grounds of up to a maximum duration of two years can also be considered if the employee has not previously been employed by the employer. If a fixed term contract without factual grounds under s14 (2) sentence 2 TzBfG would be invalid because of an employee's previous employment with the employer, only a time limit on factual grounds under s14 (1) would be possible.

Conclusion

If employers are interested in employing a retirement age employee, they should always consider a clear limitation of the employment relationship based on factual grounds in addition to the possibility of postponing the defined retirement date according to s41 sentence 3 of SGB VI.