Gerry Sutcliffe, minister for employment relations and Sam Mercer, director, Employers Forum on Age respond to our questions on age discrimination legislation.
Will the new age discrimination laws have a greater impact on business than any other form of anti-discrimination legislation?
Research from the University of Kent suggests that age discrimination is the most frequently cited form of discrimination by employees. It is obviously too early to speculate on exactly what will happen after 1 October, but as we are all affected by age, the regulations will potentially have a wider scope for impact. Certainly though, businesses should see an increase in productivity through retention of older, more experienced staff members, and more efficient use of resources.
In a recent survey of EFA members, 40% believed age would be more significant than sex discrimination and 49% believed it would be more significant than race discrimination. Age laws will protect everyone and will require a wholesale review of all employment policies from recruitment to retirement.
The legislation has been dubbed the biggest piece of social engineering for 20 years. Is that fair?
The regulations will provide important new rights and responsibilities for every employee and business in the UK. Age discrimination is possibly the most important piece of legislation because age affects us all. It is the last strand of the EU Employment Directive and complements laws already in place to protect workers from discrimination on the grounds of gender, race, disability, sexual orientation, religion and belief.
It is fair comment that age laws will require a significant rethink on career paths and the way we work. We are challenging assumptions that people should retire at a specific age, that they should work in more senior positions as they get older, that a manager will always be older than the person working for them, that a 30-year old may be less physically fit to work than a 50-year old, and that age in general doesn’t ‘matter’ when it comes to making decisions about employment. That’s no easy task in six months.
Will the legislation lead to a surge of age discrimination claims as it has done in the US and Ireland?
If employers begin to address their age-based HR practices now, they can protect themselves from claims when the regulations come into force. The US and Ireland have taken different approaches to implementing age discrimination legislation for a number of different socio-economic and political reasons, and both are slightly different from ours. There could be up to 8,000 additional tribunal applications a year as a result of the new regulations.
Based on overseas experience, we anticipate large numbers of claims, particularly in periods of economic downturn (US experience).
Employers shouldn’t underestimate the number of articulate and angry older people who have been discriminated against in applying for jobs, training and promotion who will be ready and willing to bring claims come 1 October 2006.
US experience shows this legislation is used by older, white males – often senior executives with high salaries – and that the compensation awarded is very high. It is also likely that age will be linked to sex, race and other discrimination claims going forward. EFA employers predict a quarter of all future discrimination cases will have some element of age in them going forward.
Will it lead to a change in the culture of the workplace?
This is the key intention of all anti discrimination laws. The age laws will be crucial in the process of accelerating a culture change in the workplace, and will potentially transform the lives of all workers. The new laws will help to ensure that people are no longer denied jobs or harassed because of their age, and that workers of all ages will have an equal chance of training and promotion.
Yes, but not overnight. Thirty years on we haven’t solved racism or sexism at work, but they are widely recognised as unacceptable attitudes. Today it is still OK to be ageist. Getting the balance right is going to be the greatest challenge facing employers. If people think joke cards about being ‘over the hill’ or saying ‘you’re having a senior moment’ will land them in a tribunal, there will be a kick back from employees and resentment could set in. In reality, some comments will be acceptable to one , yet offensive to another. Employers will have a fine line to tread.
What are the key differences from the draft regulations?
We have listened to employers, and tightened up the regulations to reflect their comments on a number of areas. We have made sure that the retirement procedures are easier to follow and service-related benefit procedures have been simplified. We have amended the redundancy age bands to remain the same as they are now, which fits better with the overall policy objectives, and we are confident that this is still in line with the EU directive. We have also clarified the occupational pension provisions.
The timetable for the ‘duty to consider’ process has been relaxed and employees are required to provide a more realistic three-month notice of an intention to stay on rather than the previous six weeks.
The biggest change is redundancy. The current age bands in the Statutory Redundancy Payments (SRPs) are maintained and employers’ schemes that exactly mirror the SRPs are exempt. Any enhanced scheme that doesn’t mirror the SRPs will be unlawful or require objective justification. This will cause employers headaches for years.
The definition of retirement has changed significantly in the final regulations. Is this good for employers?
When we consulted on the draft retirement procedures in summer 2005, employers, employer organisations, and employment lawyers were concerned about how the procedures would work in practice. As a result, we amended the regulations to reflect these specific issues. The final procedures have been developed to enable a constructive dialogue between employees who want to continue working after retirement age, and their employers. They will also allow employers and employees to benefit from a longer notice of retirement, so both parties can plan for the future more effectively.
Yes, retirement is much easier for employers to implement and the fear has been taken out of having a proper conversation with an employee over whether they can or cannot stay on. In the first few years of the regulations, employers will be naturally cautious and risk-averse. We were concerned the regulations as drafted would have encouraged employers to get rid of everyone at 65, now we believe employers will be much more comfortable about keeping people on.
Key changes in the legislation
Here are some of the significant changes from the draft age regulations published in July last year:
The ‘default’ retirement age of 65 remains. The provisions regarding dismissals for retirement have been completely re-worked to make it clear that it will not be unfair to dismiss an employee for a genuine retirement, provided certain procedural requirements are met.
The final Regulations also clearly set out where retirement cannot be the potentially fair reason for dismissal.
One change is that an employee’s request to continue working must now be made at least three months (but not more than six months) before the intended retirement date. The time limits in the draft Regulations were six weeks and one year respectively.
The lower and upper age limits on the right to a statutory redundancy payment will be removed with effect from 1 October 2006. The government considers that retaining the current different age-related multipliers of a week’s pay is justified.
The final regulations set out that it will not be age discrimination for employers to operate a redundancy pay scheme that mirrors the statutory scheme but is more generous in certain specified respects.
Pay and benefits
The provisions on service-related benefits have been completely re-drafted. As was the case with the draft regulations, there is a ‘blanket’ exemption for length of service requirement of five years or less.
The final regulations are much clearer. In relation to contributions to personal pension schemes, employers will be able to make different contributions on the basis of age.
Group HR director
The Regulations can only be a good thing long term. They should be viewed as assisting companies in their longer-term manpower planning, and a practice run for when the demographics are such that the majority of the workforce is over 55. HR teams should be taking the lead and briefing line managers in what the regs mean and ensure retirement policies and practices are updated, paying particular attention to the employee and employer retirement notification periods. There are still grey areas around benefits. I believe age-related claims will occur more around where an individual requests to work post-retirement and the request is refused, and also where individuals believe that they have been passed over for training or promotion because of their age.
Employment partner and head of equality & diversity
The Regulations offer simplification of certain areas and clarification of others. There is now a more straightforward and less demanding test for providing contractual benefits based on service in excess of five years and there is also clarification of the ability to give enhanced redundancy payments. Interestingly, these regulations omit any reference to an employer deciding a request by an employee to work beyond 65 in ‘good faith’ – the duty is only to consider the request and notify the decision.
Partner, employment department
There will be specific procedures for retirement and failure to follow those will be an unfair dismissal. However, although the government’s stated intention was that these arrangements would encourage employers to allow employees to work beyond 65, in practice it is possible that the legislation will not actually have that effect: employers will not need to give reasons for refusing to allow someone to continue to work beyond 65 and may adopt blanket policies of no work beyond 65 to try and avoid the risk of unfair dismissal claims.
Partner, employment department
From October 2006, employers must tell employees that they can ask to work beyond their expected retirement date. They must do so six to 12 months before the date arises. Special rules will, however, apply for those due to retire between October 2006 and 1 April 2007. Where contractual notice is at least four weeks, (and this is given before 1 October), employers will only need to tell employees as soon as practicable after the new law is introduced. Where contractual notice is given after 1 October, the employer will comply with its obligations if it tells employees of the right when notice is given. Non-compliance may lead to compensation of up to eight weeks’ pay.
The full regulations can be found at www.dti.gov.uk/er/equality/age.htm
Alan Johnson, secretary of state for trade and industry spells out his thoughts on justifying age-based work practices