Structuring a transition-to-retirement arrangement for a senior employee
TTR arrangements typically reduce an employee's hours or responsibilities in the years before retirement. They must be employee-led to avoid age discrimination under the Age Discrimination Act 2004 (Cth) and state equivalents, and must align with superannuation TTR income stream rules.
This is an 8-step workflow for structuring a transition-to-retirement (TTR) arrangement for a senior employee, balancing succession planning against age discrimination risk.
Before you start
- Employee expressed interest in transition to retirement (not employer-initiated)
- Succession plan for the role
- Current employment contract and remuneration details
- Superannuation and financial adviser engagement by the employee
The workflow
Document the employee-initiated request
The request to transition must come from the employee. Document it in writing — employer-initiated TTR conversations create age discrimination risk.
Confirm right to request flexible working
Employees over 55 with at least 12 months service have a statutory right to request flexible working. The employer must respond in writing within 21 days.
Design the transition structure
Options include reduced hours, job share, reduced responsibilities, or change of role. Confirm the structure maintains NES entitlements and is not a dismissal in disguise.
Check superannuation interaction
The employee's financial adviser should confirm interaction with TTR income streams, preservation age, and work bonus rules. Do not give financial advice.
Address knowledge transfer
Build a knowledge transfer plan into the arrangement — documenting processes, mentoring a successor, and key relationship handovers. Tie milestones to agreed timelines.
Draft the variation to contract
Document the new arrangement as a variation to the employment contract — reduced hours, pro-rated remuneration, updated position description. Avoid fixed-term end dates tied to age.
Address leave, redundancy, and LSL
Confirm how the arrangement affects accrued leave, long service leave crystallisation, and any redundancy entitlement calculation (pre-change remuneration usually applies).
Implement and review
Execute the variation. Schedule six-monthly reviews to confirm the arrangement is working, knowledge transfer is progressing, and the employee remains willing.
What you will have at the end
A documented TTR arrangement that respects age discrimination law, supports orderly succession, and gives the employee a dignified pathway into retirement.
Common issues
- Employer-initiated conversations that create age discrimination risk
- Fixed end dates tied to birthdays, which are per se age-discriminatory
- Reduced hours that effectively constitute a forced redundancy
- Knowledge transfer obligations that are vague and unenforceable
- Failure to refresh position description, leaving the employee with the old job at reduced hours
Run this workflow on a real matter
Quillio drafts transition-to-retirement variations with age discrimination risk flagged and knowledge transfer milestones built in. See /practice-areas/employment-lawyers.
This workflow is a general guide. TTR arrangements interact with superannuation, tax, and Centrelink rules — the employee should obtain independent financial advice.
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