Working-life time accounts agreed in steel industry

In October 2000, Germany's first sectoral agreement on "working-life time accounts" was signed in the steel industry. The agreement essentially offers employees the possibility of saving overtime pay over a long period by paying it into an account. This money can be used to finance a period of time off, or for early retirement or an additional pension. The concrete details of the agreement will be worked out at company level.

On 11 October 2000, the IG Metal metalworkers' trade union and the Employers' Association for the Steel Industry (Arbeitgeberverband Stahl eV, AGV Stahl) signed Germany's first sectoral agreement on "working-life time accounts" (Lebensarbeitszeitkonten). The agreement entitles employees in the steel industry to save up overtime pay and other portions of their income in special accounts. This capital can be used to fund early retirement or periods of time off work (sabbaticals) or - in exceptional cases - to increase pensions.

In concrete terms, the agreement allows employees to save:

• overtime pay of up to 169 working hours per year - the permitted number of annual overtime hours in the steel industry according to the current collective agreement on the 35-hour working week. It is thus possible to save up one year's free time over 10 years' work;

• special payments, variable pay, capital-forming payments under employee savings schemes or a proportion of monthly income. Until the age of 45, employees may save a total of up to 15% of their monthly income, rising to 20% from the age of 45. This allows employees to save up one year of early retirement or free time over 4.5 years' work; and

• time off accruing from night shifts.

All savings have to be exchanged for (free) time, even if pay was used to credit the account. Only if it is not possible to use the savings as time off can they be exchanged for an additional company pension. If employees move to another company or die in employment, the savings are paid out in cash. As there is no general provision to safeguard working time credits in the event of bankruptcy, this is an important point to be agreed on in subsequent company-level talks (see below).

The agreement, covering about 85,000 employees in the west German steel industry, will come into force at the beginning of 2001. The exact form that the accounts will take must be laid down at company level, on a voluntary basis, by employers and works council. As many firms have already reacted positively to the agreement, it can be expected that it will be widely implemented. The social partners have pointed out that the scheme agreed provides for a "progressive" variety of options and that it might therefore become a model for other sectors. As the money saved remains free of taxes and social contributions at the time of saving, it might become part of an additional pension scheme.

Although the introduction of individual working time accounts has already become a major instrument for achieving flexible working time arrangements, most collective agreements define limits on the use of such accounts and lay down a certain period of time - usually between six months and two years - within which the working time account has to be balanced (DE0004255F). These short-term working time accounts are mostly used to equalise fluctuations in production activity, while long-term accounts can meet employees' needs for longer periods of free time (DE0005261F).