An experienced employee comes to you and says they are thinking about retirement. They are not ready to leave just yet but they would like to slow down. Instead of working five days a week, they would like to work three. For many employers, particularly where the employee has been with the business for years, the first instinct may be to say, “Of course, we can work something out.”
That flexibility can be good for both sides. You retain an experienced employee and their knowledge for longer while they get the opportunity to make a more gradual transition towards retirement. However, what starts as an informal conversation can have implications for the employee’s contract, salary, annual leave, pension contributions and other benefits.
An employee reducing hours before retirement therefore needs to be treated as a formal change to their working arrangements, not simply a change to the weekly rota. Here is what employers should consider before agreeing to the new arrangement:
Start by understanding exactly what the employee is asking for
The first step is a conversation. Do not assume that you know what the employee means by reducing their hours. One employee may want to move from five days to three full days. Another may want to work shorter days across the week. Someone else may want to reduce their hours gradually over a year or two.
You should establish what working arrangement the employee is proposing, when they would like it to begin and whether they see the change as permanent or something that should be reviewed after an agreed period.
It is also important to separate the request for reduced hours from retirement itself. An employee reducing hours before retirement has not necessarily given notice that they intend to retire on a particular date. Avoid making assumptions about when the employee will leave unless they have clearly communicated their intentions.
For most employees, moving from full-time to part-time work is a matter to be agreed between the employer and employee rather than a general statutory entitlement. The Workplace Relations Commission’s Code of Practice on Access to Part-Time Work specifically addresses requests to move between full-time and part-time work. There are separate statutory flexible working provisions for certain employees with caring responsibilities.
Consider whether the arrangement works for the business
You do not need to look at the request purely from the employee’s perspective. You also need to understand what the proposed arrangement means for the business.
If someone currently works Monday to Friday and wants to move to three days, consider how their responsibilities will be managed on the other two days. If they manage people, deal with clients or hold a role that requires regular availability, you may need to agree how those responsibilities will work under the new arrangement.
Consider practical questions such as:
- Which days will the employee work?
- What will happen to their existing workload?
- Will any responsibilities need to move to another employee?
- Will additional cover be required?
- Does the role need to be redesigned to reflect the reduced hours?
- Are there particular days when the business needs the employee to be available?
- Should the arrangement be reviewed after three or six months?
The aim is not simply to decide whether you can accommodate fewer hours. You need an arrangement that is workable for both sides.
Do not leave the agreement as a verbal conversation
This is one of the most important parts of the process. An employee may have worked with you for 15 or 20 years. You may have an excellent relationship and everyone may be completely comfortable with what has been discussed. You should still document the change. Once you have agreed the new arrangement, confirm it in writing and keep a copy on the employee’s HR file. A clear written record protects both the employer and employee because nobody has to rely on their memory of a conversation six months later.
For an employee reducing hours before retirement, the written confirmation should normally address:
- The employee’s request to reduce their working hours
- Their new contracted hours
- Their agreed working days or working pattern
- The date the new arrangement begins
- Whether the change is permanent or subject to review
- Their revised salary or pay arrangements
- Their revised annual leave entitlement
- The treatment of relevant benefits
- Any impact on pension contributions
- Any agreed changes to their role or responsibilities
- A review date, if appropriate
Do not simply send an email saying, “As agreed, you will work three days from January.” The purpose of putting the arrangement in writing is to make sure both sides understand the full effect of the change.
Explain what will happen to the employee’s pay
Where the employee’s contracted hours reduce, their salary will normally reduce accordingly under the new agreement. For example, imagine an employee earns €60,000 for a five-day working week and asks to move permanently to three days per week. If the parties agree to calculate their new salary on a straightforward pro-rata basis, their salary would reduce to €36,000.
That is a significant financial change and it should be made clear before the employee agrees to the new arrangement. The employer should confirm the revised salary in writing and ensure payroll receives the correct effective date and new pay details. This is particularly important where an employee reducing hours before retirement is making financial decisions about the final years of their working life. Your responsibility is to make the employment consequences clear so the employee can make an informed decision.
Explain how annual leave will work
Annual leave can cause confusion when an employee moves from full-time to part-time hours. Under the Organisation of Working Time Act 1997, annual leave is linked to time worked. The WRC states that all employees, including part-time employees, earn annual leave and sets out three statutory calculation methods. The maximum statutory entitlement is four of the employee’s normal working weeks.
This is where employers need to be careful with the language they use. If an employee previously worked five days per week and had the statutory four working weeks of annual leave, that would commonly equate to 20 working days. If the employee then works three days per week and remains entitled to four normal working weeks of leave, that may equate to 12 of their new working days, subject to the applicable statutory calculation and their contractual entitlement.
The employee has not necessarily gone from “four weeks’ holidays” to a smaller number of weeks. Their working week has changed, so the number of working days needed to give them four weeks away from work has also changed.
If your organisation provides annual leave above the statutory minimum, you should also check the employee’s contract and your annual leave policy to determine how the additional contractual entitlement will be treated.
For an employee reducing hours before retirement, calculate the revised entitlement and explain it clearly rather than simply telling the employee that their holidays will be reduced.
Check how public holidays will be affected
Public holidays should also form part of the review. A part-time employee generally needs to have worked at least 40 hours in the five weeks immediately before a public holiday to qualify for the statutory public holiday benefit.
How the benefit applies then depends on the employee’s working pattern. For example, where the public holiday falls on a day the employee does not normally work, an eligible employee is generally entitled to one-fifth of their normal weekly wage for that day.
Do not assume that the employee’s previous public holiday arrangements can simply continue unchanged. Check their new working pattern and apply the relevant rules.
Explain the potential impact on pension contributions
Pension contributions are particularly important when you are discussing an employee reducing hours before retirement. If the employee’s pension contributions and employer contributions are calculated as a percentage of pensionable salary, a reduction in salary may reduce the amount going into their pension. However, occupational pension arrangements differ, so employers should check the rules of the particular scheme rather than make assumptions.
There is also MyFutureFund to consider; Ireland’s auto-enrolment retirement savings system began on 1 January 2026. For 2026 to 2028, participating employees contribute 1.5% of gross pay, employers contribute 1.5% and the State provides a 0.5% top-up. Contributions are calculated on gross earnings. Therefore, where an employee’s gross pay falls because their hours have reduced, the euro amount being contributed through MyFutureFund will generally fall with it.
Employers should explain the payroll and employment implications they can confirm but should be careful not to stray into individual financial advice. If the employee wants to understand what reducing their hours could mean for their eventual pension income, they may need to speak to their pension provider, scheme administrator or an appropriate financial adviser before making their final decision.
Check other benefits before confirming the arrangement
Salary and pension contributions are not the only things that may be affected. Before confirming reduced hours, review the employee’s overall package. Depending on the organisation and the employee’s contract, this could include:
- Health insurance
- Life assurance
- Income protection
- Bonus arrangements
- Commission
- Company car arrangements
- Allowances
- Employer pension contributions
- Other benefits linked to salary, working hours or employment status
Some benefits may remain exactly as they are. Others may change. The important point is to check rather than assume. Finding out after the arrangement has started that a benefit has changed is frustrating for the employee and creates an unnecessary employee relations issue for the employer.
Be careful about assumptions around retirement
There is another important distinction employers should keep in mind. An employee reducing hours before retirement is not necessarily confirming a retirement date. An employee might tell you that they want to “start slowing down” or that they are “thinking about retirement in the next few years”. That does not automatically mean they have given notice of retirement.
Keep your documentation focused on what has actually been agreed. If the agreement is that the employee will move from five days to three from 1 January, document that change. Do not add an assumed retirement date that the employee has not formally agreed.
This is particularly important because age is one of the protected grounds under Irish employment equality legislation. Retirement and conversations with older employees therefore need to be managed carefully. If you are reviewing retirement arrangements within your organisation, our guide to retirement age in Ireland and what employers need to know explains the current position in more detail.
Use the transition to think about succession
There is also a significant business opportunity in getting this process right. Someone who has spent 15, 20 or 30 years with your organisation may hold far more knowledge than appears in their job description. They may know the history behind particular client relationships, understand why certain processes operate the way they do and know who to call when something goes wrong.
If that employee retires suddenly, much of that knowledge can leave with them. An employee reducing hours before retirement can give the business valuable time to manage that transition properly. Think about what knowledge needs to be documented and who needs to learn it. You might use the transition period to introduce another employee to important clients, document processes, transfer key responsibilities or allow the experienced employee to mentor someone who will eventually take on more of their role. From a commercial perspective, that can make phased retirement valuable to the business as well as the employee.
Employer checklist: what should you do when an employee asks to reduce their hours?
When you receive a request, work through it methodically.
- Discuss exactly what working arrangement the employee wants.
- Ask when they would like the new arrangement to begin.
- Establish whether they are requesting a permanent change or a temporary arrangement.
- Consider whether the proposed working pattern is operationally workable.
- Agree how their responsibilities and workload will be managed.
- Calculate and confirm their revised salary.
- Recalculate their annual leave entitlement.
- Check how public holidays will apply under the new working pattern.
- Review the impact on pension contributions.
- Check whether any other benefits will be affected.
- Confirm the agreed contractual changes in writing.
- Update payroll and your HR records.
- Consider whether succession planning or knowledge transfer should begin.
- Agree a review date if appropriate.
Flexibility works best when everyone knows what has been agreed
There can be real advantages to accommodating an employee reducing hours before retirement. The employee gets the opportunity to reduce their working commitments gradually rather than moving directly from full-time employment to retirement. The employer retains valuable experience for longer and has more time to plan for succession and transfer knowledge.
The arrangement itself is rarely the difficult part. Problems are more likely to arise when a change is agreed informally and the practical consequences are never properly discussed. Take the time to work through the employee’s request, check the contractual and financial implications, explain what will change and put the final agreement in writing.
That gives the employee clarity and gives your business a clear record of what has been agreed. If an employee has asked to reduce their working hours and you are unsure how to manage the request, HRconsultants.ie can help you review the proposed arrangement, understand the employment implications and put the appropriate documentation in place. Get in touch with our team today.
Frequently Asked Questions
Can an employee reduce their hours before retirement?
An employee can ask to reduce their working hours before retirement but there is not a general automatic right to move from full-time to part-time work simply because they are approaching retirement. The employer and employee can discuss whether a reduced working arrangement is suitable and agree new contractual terms. Separate statutory rights to request flexible working may apply to certain employees with caring responsibilities.
Do I have to agree if an employee asks to reduce their hours before retirement?
Not necessarily. Employers should consider the request carefully and look at whether the proposed working arrangement can operate effectively within the business. This may include considering workload, client or customer requirements, staffing levels, management responsibilities and whether duties would need to be redistributed. The WRC Code of Practice on Access to Part-Time Work provides guidance for employers dealing with requests to move between full-time and part-time work.
Should reduced working hours be confirmed in writing?
Yes. If you agree to change an employee’s contracted working hours, you should document the change clearly. The written confirmation should include the new working hours and pattern, start date, revised pay and any changes to annual leave, pension contributions, benefits or responsibilities. It should also state whether the arrangement is permanent or subject to review.
What happens to an employee’s salary when they reduce their hours?
Where an employee agrees to reduce their contracted hours, their salary will normally be adjusted to reflect the new arrangement. For example, an employee earning €60,000 for a five-day week who moves to three days could move to €36,000 if the employer and employee agree to calculate their salary on a straightforward pro-rata basis. The revised salary should be agreed and confirmed in writing before the new working arrangement begins.
What happens to annual leave when an employee reduces their hours?
Part-time employees continue to earn annual leave. Under Irish legislation, statutory annual leave is linked to time worked and the maximum statutory entitlement is four of the employee’s normal working weeks. If an employee moves from five working days per week to three, the number of working days required to provide four normal working weeks will change. Employers should calculate the employee’s new entitlement based on the applicable statutory rules and check their contract for any additional contractual leave.
Will reducing working hours affect an employee’s pension?
It can. Where pension contributions are based on a percentage of salary or pensionable earnings, reducing salary may reduce the amount contributed by both the employee and employer. The exact position will depend on the pension arrangement. Employers should explain any changes they can confirm but employees may need to speak to their pension provider, scheme administrator or financial adviser about the longer-term impact on their retirement income.
Does reducing hours affect MyFutureFund contributions?
It can. MyFutureFund contributions are calculated as a percentage of gross pay. If an employee’s gross earnings fall because they reduce their working hours, the euro amount contributed by the employee and employer will generally reduce accordingly. Employers should ensure payroll records reflect the employee’s new earnings correctly.
Does an employee asking for reduced hours mean they have given notice of retirement?
No. An employee reducing hours before retirement has not necessarily given notice that they intend to retire. An employee may reduce their hours several years before eventually retiring or may not have decided on a retirement date at all. Employers should document only what has actually been agreed and should not assume a retirement date based on an informal conversation.
Can an employer suggest reduced hours to an older employee?
Employers should approach this carefully. Age is a protected ground under Irish employment equality legislation. You should not assume that an employee wants to work fewer hours simply because of their age or proximity to a contractual retirement age. Where the employee raises the subject, you can discuss the options available. Where the employer initiates a conversation, it should have a legitimate business or workforce-planning context and should avoid assumptions based on age.
Can reduced hours be agreed for a trial period?
Yes, where both sides agree. A trial period can be useful where the employer and employee want to see how the new working arrangement operates in practice. If you choose this approach, document the duration of the trial, the working arrangements that apply during it, when the arrangement will be reviewed and what happens at the end of the trial period. Do not leave these points to assumption.
What should an employer include in a reduced-hours agreement?
The written agreement should clearly record the new contracted hours, working pattern, start date and revised salary. It should also address annual leave, relevant benefits, pension arrangements and any changes to the employee’s duties. If the arrangement is temporary or subject to review, include the review date and explain what will happen after that review.
Is reducing hours before retirement the same as phased retirement?
Not necessarily. “Phased retirement” is often used to describe an arrangement where an employee gradually reduces their working commitments as they move towards retirement. However, an employee asking to work fewer hours does not automatically mean that they have committed to retiring on a particular date. Employers should focus on the actual contractual arrangement agreed with the employee rather than relying on the label used to describe it.