The generation pact is a solution that connects young and old and at the same time contributes to a healthy labor market. The idea arose around 2010, a period in which youth unemployment increased and it became clear that people had to work longer. Due to changes such as the abolition of the VUT scheme (early retirement), a higher AOW retirement age and adjusted relief measures, the need grew for a scheme that creates room for younger employees and beside older colleagues in the last years before their retirement. The generation pact offers that solution by giving older employees the opportunity to work less, while younger colleagues benefit from more opportunities for permanent contracts and career opportunities. The pact is not called an alliance for nothing: it is a collaboration whereat employees of different generations and employers all benefit.
What does it mean for older employees?
For older employees, the generation pact brings clear relief. Working fewer hours creates more peace and reduces stress. This not only has a positive effect on the work experience, but also on health. The idea is that you can continue working with pleasure for longer, without this being at the expense of your financial situation.
An important advantage is that you will retain your full pension accrual. This means that, despite working less, you will not incur a pension gap. You will give up part of your salary, but employers often compensate half of this loss of income. In some cases, you can fill the remaining gap with part-time pension or accrued leave days. This way, your financial situation remains stable, while you benefit from a better work-life balance.
The generation pact therefore gives older employees the opportunity to reach retirement in a healthier, more active and more enjoyable way, without having to worry about their income or future.
Opportunities for younger employees
The generation pact offers younger employees the space to develop themselves. The hours that older colleagues work less create opportunities for new jobs or permanent contracts. Especially those permanent contracts are of great value, because they offer security in terms of income and career.
For example, a stable income makes it easier to get a mortgage, buy a house or make plans for a family. This financial security provides peace of mind and offers younger employees the opportunity to shape their lives. The generation pact can therefore really make a difference for the future of young employees.
What do employers gain from this?
Employers also reap the benefits of a generation pact. Healthy and motivated older employees are more productive and less often ill. This reduces the costs of absenteeism and replacement. At the same time, these experienced employees can transfer their knowledge and expertise to younger colleagues. This ensures that valuable experience is retained within the organization.
It is also important for companies to attract and retain young employees, especially in view of the aging population. A permanent job increases the job satisfaction and loyalty of these young employees, which makes them valuable forces within the organization in the long term.
Due to the balanced composition of young and old and the benefits that the generation pact offers for health, job satisfaction and financial security, this scheme contributes to future-proof business operations.
How does the generation pact work?
The generation pact is often shaped via a so-called 'x/y/z arrangement'. In this arrangement, 'x' stands for the percentage that you work, 'y' for the percentage of your salary that you receive and 'z' for the pension accrual.
The pension accrual – 'z' – remains virtually the most cases 100%. This means that even if you work less, you will not incur a pension gap. From the age of 57, it is tax-technically possible to continue building up your full pension, which makes participation in the generation pact interesting from this age.
The percentage you work – 'x' – is determined by the agreements in your collective labour agreement. For example, you can choose to work 50%, 60% or 80% of your original hours. For example, if you worked 40 hours a week, then with a 50% arrangement you will only work 20 hours a week.
The salary you receive – 'y' - is also determined by the agreements in your collective labor agreementIf you work 50%, you get for example once in a while 75% of your old salary. If you work 60%, you will receive 80% of your salary, and if you work 80%, you will receive 90% of your original income. This limits the loss of income, while you fully benefit from the advantages of working less.
Financial insight
To ensure that participation in a generation pact is financially feasible, it helps De Unie you like to make an overview of the financial consequences. That way you know exactly what participation means for your finances and you will not be faced with any surprises. Many collective labor agreements stipulate that this financial advice is offered free of charge.
No generation pact in your collective labor agreement?
If your collective labor agreement does not contain a generation pact, there are often alternatives possible. For example, you can discuss with your employer whether you can adjust your schedule or work fewer hours. You can also use a personal choice budget or extra days off to reduce your workload. It is always worth talking to them and exploring the possibilities.
Want to know more?
Want to know if there is a generation pact in your sector or company? Check your collective labor agreement or contact De Unie. Our experts are happy to think along with you about customized possibilities. Do you have questions? Call our Service Center via 0345 851 963 or send an e-mail to sc@unie.nl. We are available on workdays between 8:30 and 17:00.
