Early retirements and voluntary redundancies: can this avoid a redundancy programme?

After a long working life, the time of retirement is long awaited by the employee. In some situations, this retirement will come sooner than expected. In this article we will review some of the scenarios that make it possible to leave the labour force early.

Description and characteristics of incentive leave

This is a mutual agreement between the employee and the company in which compensation clauses are stipulated for voluntarily leaving the job. The compensation received is subject to negotiation by the parties involved. Thus, it may be equal to that of a dismissal or higher. It is not uncommon for this type of termination to award an amount equivalent to the salary previously received.

Incentivised voluntary redundancies are often integrated in the framework of collective dismissals as a protection mechanism for those who are affected by such a situation. Despite the simplicity of the idea, such dismissals have been a source of controversy on many occasions and it is advisable to have a senior legal team to deal with them. Problems arise from the vagueness of the regulatory law and the flexibility in application.

The versatility of the incentive leave and associated conditions makes it difficult to interpret the related legal documents. The jurisprudence so far is equally varied, so that each case must be studied in detail and independently.

An important difference between the severance payments in question and severance pay is that social security interprets these payments as being taxable without exemption unless they are received during a single tax period. In this case, it is considered as notoriously irregular employment income and the worker is entitled to a 30% reduction on his tax obligations.

These voluntary redundancies are complex and it is always advisable to seek professional guidance from an experienced professional in the field.

Description, characteristics and pre-retirement age for early retirements

The retirement age in 2020 can be brought forward if a number of conditions are met. People who receive the public pension associated with retirement under these circumstances qualify for what is known as early retirement.

In Spain, early retirement age is defined as being below 66 years of age. However, there is a lower limit. A worker in our country cannot benefit from early retirement before the age of 62, which is the same as the pre-retirement age. To do so, he or she must have paid contributions for at least 35 years and 3 months. Otherwise, he or she will have to wait one more year and prove 33 years of service.

There are two main types of early retirement. On the one hand, there is forced or unemployment early retirement. In this case, the former employee has a margin of four years over the normal retirement age. On the other hand, there is voluntary retirement, in which the termination is voluntary and initiated by the person concerned. In this case, you can only apply when you are at least 63 years old.

When applying for a pension, it is necessary to carefully study the worker's work history in order to determine the amount of compensation to be received. This calculation should be done by experts in the field to avoid costly mistakes.

Social security and retirement

Any user can use the tools provided by the Social Security for early retirement to calculate their pre-retirement age or the pension they would have left. To do this, you must first review the document that explains how the calculations are made to obtain the correct amount.

You can use this calculator to get an overall idea of your pension. However, due to the many nuances in the regulations applicable to retirement pensions, it is always advisable to consult a specialised lawyer.

Description and characteristics of partial retirement

Partial retirement is a hybrid model of retirement that allows a minimum amount of activity to be maintained while receiving a pension. The pension is not full but is calculated as a percentage of the applicable total based on the amount of work the person continues to do. This formula is intended for workers who have a part-time contract or who train relief staff while they reach full retirement.

To qualify for a pension under this type of retirement scheme, the applicant must be at least 60 years old. The amount of compensation can never be less than the relevant percentage of the minimum pension. There are a number of compatibilities and incompatibilities that may be of interest in the individual case. For example, part-time work does not have to be in the former employer, but can be a new job. You cannot at the same time receive a pension for permanent incapacity or severe disability while receiving partial retirement compensation. You can ask the law firm which is more advantageous for you.

Relationship between early retirements and a redundancy programme

In most cases, an ERE is defined as an employment regulation procedure in which the employment contracts of at least 10% of the workforce are terminated. However, a number of worker protection mechanisms allow older workers the opportunity to take early retirement.

If the person has been included in the termination of contracts, he or she can take early retirement if he or she fulfils two requirements. Firstly, they must be at least 62 years old. Secondly, they must have contributed to the system for at least 35 years. If these two conditions are met, the former employee can receive an early forced retirement pension.

One of the most interesting aspects is that the person concerned can receive the unemployment benefit for the over-52s if he or she does not wish to take early retirement. When making these decisions, it is very important to be clear about the assumptions in your specific case and the amount that would be paid to you if you were to take early retirement. All these details can be consulted with a lawyer experienced in these matters. A consultation in time can avoid hard disappointments in the future.

The laws that regulate the different ways in which a worker in Spain can retire are complex. It is necessary to know the legislation in detail because not even the Social Security has a fixed protocol for all cases. The different situations concerning individuals and their work history have to be interpreted correctly in order to reach a satisfactory solution.

Therefore, it is of vital importance that the future retiree leaves the whole procedure in the hands of professionals. Elías y Muñoz Abogados is at your service for everything you may need. We will defend your interests and ensure that the amount you get after your retirement or early retirement is the amount that corresponds to you.

If you have been involved in an ERE or are negotiating a consensual dismissal, do not hesitate to contact us so that we can advise you. We have worked on many similar cases and know how to protect the future of our valued clients.