BAG: No full inflation bonus in block-model phased retirement

The Federal Labor Court ruled that employees in block-model phased retirement receive inflation compensation payments only proportionally to their reduced working hours. The decision affects public sector workers with phased retirement agreements.

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Ruling: Partial payment only

On March 17, 2026 (case no. 9 AZR 80/25), the Federal Labor Court decided that employees in block-model phased retirement receive inflation compensation payments only proportionally to their reduced working hours. This means if you’re in the active phase of phased retirement, you won’t get the full inflation bonus - you’ll receive half of what full-time colleagues get.

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Why the court decided this way

The court had to clarify whether inflation compensation payments should follow the same rules as regular salary components. The key question was whether these special payments should be treated like normal wages (which are reduced during phased retirement) or as separate benefits.

What happened in this case

An employee had entered phased retirement with a block model (working full hours for one year, then fully released for another year). During the working phase, his employer paid only half of the inflation compensation bonus. The employee sued for the full amount, arguing he was working full hours during that period.