A hand-over contract and how it works

We explain what is included in this contract (which is required for certain types of partial retirement)

If an employee requests partial retirement, the person engaged to replace them will enter into a hand-over contract with the company. These contracts are governed by Articles 12.6 and 12.7 of the Workers' Statute and by Royal Decree Law 5/2013. Both legal instruments set forth the mandatory nature of these types of contracts if an employee chooses to take partial retirement before they have reached the standard retirement age, which, in 2018, is 65 years and 6 months.

These types of employment contracts are still not very common. According to SEPE data, in 2016 their number totaled 15,537 throughout Spain. This may be because people still don't know much about them. It might be very useful for both workers and companies to understand the particular characteristics of these contracts and to be aware that they can only be used if an employee takes early retirement. That's why we're explaining some of the details of these contracts here.

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Characteristics of a hand-over contract

Companies that need to enter into a hand-over contract must firstly know who they can and can't employ. The person engaged to take over from the current employee must either be unemployed or have been previously employed by the company on a fixed-term contract. In other words, under no circumstances can this position be held by a person who is already employed by the company on a permanent basis.

Once a suitable candidate has been selected to job share with the person who is leaving (i.e. when a replacement has been chosen), a contract must be executed in accordance with the official template. The contract must include information about the person taking retirement (specifying the reduction in working hours) and information about the individual engaged to replace them (stipulating their duties and working hours). This important piece of information legally binds both employees to the contract in the future, as the ultimate purpose of a hand-over contract is for the individual engaged as a replacement to occupy the position of the partially retired person on a permanent basis when they retire completely.

Given that an individual is engaged to actually replace the employee taking partial retirement in the near future, their position may be the same as or similar to that of the person who is about to retire. It is a mandatory requirement for there to be a correlation between both contribution bases. This means that the contribution base of the person engaged to replace the existing employee cannot be lower than 65% of the average contribution bases of the individual taking partial retirement over the last six months of their assessment base period.

The individual employed as a replacement may work full-time or part-time. Whatever the arrangement between the parties, the new employee's working hours must be at least the same as the number of hours that have been deducted from the work schedule of the person who has partially retired. The new employee may work during the period when the person being replaced is not at work, or at the same time as them. The last option is more common when the replacement employee needs to learn how to perform their new role. The new employee works at the same time as the person who is about to retire in order to learn how to perform their role when the time comes.

Hand-over contracts must either be permanent or remain in effect until the person who has taken partial retirement reaches the standard retirement age and leaves the company completely. When this happens, either of the following two situations may arise: the person who has partially retired may continue to work or fully retire.

  • If the person who has partially retired decides to continue in their new role when they reach the standard retirement age, the hand-over contract can be extended on an annual basis.
  • If the partially retired individual decides to fully retire, from 2013 the company must honor the hand-over contract for a further two years, provided it is a permanent, full-time contract.
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Partial retirement: requirements to apply for partial retirement

A hand-over contract may only enter into effect if the employee meets the provisions for partial retirement. Therefore, it is important to know what these entail. In order to apply for partial retirement, an employee must be close to retirement age and meet a number of requirements to enable the company to retain them under the new employment arrangement.

The applicant for early retirement must have a full-time employment contract and have paid social security contributions for at least 33 years. A maximum of 12 months of military service may be included in this calculation. Employees with a degree of disability of 33% or more must have paid social security contributions for 25 years in order to apply for partial retirement. As well as having paid contributions for a certain amount of time, employees must also have worked at the company granting partial retirement for the last six years of their working life.

The minimum age for partial retirement is 60 for employees with a mutual insurance policy. Otherwise, the minimum age will depend on when an employee started to pay social security contributions and how long for, as there is a transitional arrangement. In 2018, the minimum age is 62, or 61 years and 6 months for people who have paid contributions for at least 34 years and 6 months at the time of the triggering event.

What happens in the future

Are you about to sign a hand-over contract? You'll be glad when you do, as you'll be able to face the future with a permanent contract in hand. As well as bringing you peace of mind and security, a permanent contract may also enable you to access certain benefits with your bank in the long run.

At BBVA, for instance, any customer who has their salary paid into their account can enjoy the “Adiós Comisiones” program to wave goodbye to fees. This means you can open accounts with no costs or fees and access an excellent range of fee-free credit cards.

Those of you who like to plan ahead can also make the most of a permanent contract to invest any surplus funds you have at the end of the month for the future: did you know that you can do this using different investment funds that offer returns of more than 10%?

If you've always dreamed about owning a house, remember that you'll be able to prove your solvency to the bank by showing them the permanent contract you sign after the hand-over period.

At bbva.es, you can discover what benefits your recently signed permanent contract can bring you in the future.

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