Retirement and employment of seniors

Chapters of the article

• How early retirement works
• What if I keep working in retirement?

Today, it is no longer the case that employers are not interested in employing seniors. The shortage of people on the market means that able-bodied seniors and senior women are often valuable “commodities”. Moreover, some employers claim that older people are much better employees than potential young replacements. They are more caring and more committed to their work.

Yet, of course, it is true that many people seek early retirement (in some periods it was even more financially advantageous) and only after a time consider returning to some gainful employment. However, there are legalities to all this.

How early retirement works

Using the pension calculator of the Czech Social Security Administration (CSSA), it is easy to find out when seniors can first apply for an early pension and how long they have to have been insured, and of course what their retirement age is and when they will reach it.

Although there are many factors that affect the normal retirement age, we can simplify the process of claiming an early retirement pension. The minimum age for early retirement is 60, so earlier is not possible. As we get older, we can say that if the retirement age is below 63 years, the early retirement pension can be granted up to 3 years earlier and up to 5 years earlier if the retirement age is above 63 years.

So let us imagine that if a citizen’s retirement age is, for example, 63 years and 8 months, he can retire at most 3 years and 8 months earlier, and a citizen with a retirement age of 64 years and 2 months can retire up to 4 years and 2 months earlier. It is only when people whose retirement age is 65 years that they can have an early retirement pension granted a full 5 years earlier than their retirement age.

For example, Mr Drobny, who was born on 1 January 1960 and whose normal retirement age is 64, can retire on 1 January 2024. However, he could not retire early until he was 60, i.e. 1 January 2020. In addition, Mrs Hubena, who was born on 1 January 1965 and has raised two children, has a normal retirement age of 62 years and 8 months. She can therefore take early retirement on 1 September 2024 at the earliest.

The amount of the reduction in the early retirement pension depends on the time missing from the date of the award of the early retirement pension until the retirement age. Of this period, it is reduced for every 90 calendar days, even if it begins, by 0.9% of the calculation base for the first 360 calendar days, then by 1.2% for the period from the 361st calendar day to the 720th calendar day and by 1.5% for the period from the 721st calendar day.

What if I continue to work in retirement?

If you decide to work as a pensioner, you can continue to receive your full pension. As a working pensioner, your employer can enter into a fixed-term or open-ended contract with you. In this case, your pension percentage will increase by 0.4% of the calculation base for every 360 calendar days. However, these 360 days do not include periods of unpaid leave, unexcused absence, temporary incapacity for work or caring for a household member. This increase can be obtained for gainful activity acquired after 31 December 2009.

Beware, however, as the pension increase is not automatic, but only on written application. An application for an adjustment or increase in the old-age pension for gainful activity while receiving a pension can be sent directly to the CSSA or submitted through the Social Security Office according to the place of residence of the pensioner. The application form is available on the website of the CSSA.

Retirement pension recipients who have been working or running a business for a long time can be advised to apply for a recalculation of their pension whenever they have completed 360 days of gainful employment, not after several years or after their employment has ended.

An application for an increase in pension may also be made by a recipient of an early retirement pension who is gainfully employed after reaching the normal retirement age.

Another way is to receive a pension of half the amount. The pension percentage is then increased by 1.5% of the calculation base for every 180 calendar days of gainful activity, i.e. 3% per year. These 180 days do not include periods of unpaid leave, unexcused absence, temporary incapacity for work or nursing a member of the household. Half of the old-age pension means half of the basic rate and half of the percentage rate.

Or you may not receive a pension. In this case, the pension percentage is increased by 1.5% of the calculation base for every 90 calendar days of gainful activity, i.e. 6% per year.

However, the award of an early retirement pension does not prevent you from earning extra money. However, the scope of your activity is limited in this case – it must not give rise to a pension. The earnings can be, for example, employment under a work contract with one employer (the so-called FTE) with a monthly income not exceeding CZK 10,000, or several small-scale jobs with the same employer that do not reach the relevant income in a given calendar month. For self-employed persons (entrepreneurs), the condition applies that the income from this activity (after deduction of expenses) does not reach the amount that triggers participation in pension insurance. This is an amount that is newly determined by law each year and for each calendar month in which the activity is not carried out, this amount is reduced by 1/12.

If you earn extra money in addition to your early retirement pension in the period before you reach retirement age and you are in an employment relationship that gives rise to participation in the insurance, it is your duty and the duty of your employer to report this to the relevant Social Security Institution. The employer is also obliged to keep the prescribed records on the employee. Your pension will be suspended until you stop working or reach retirement age.