Shake up over age will open up a Pandora’s box of issues

Consultation over age discrimination concerns far more than pensions. HR
will be in the thick of it, dealing with issues such as recruitment and
training, not to mention statutory redundancy pay changes

In the course of just seven days, the Government published a plethora of
consultation documents that promise to have a major impact on our world of
work.

They cover three vital issues: legislation on age discrimination, informing
and consulting employees, and statutory disciplinary and grievance procedures.

Each has important practical implications for employers, large and small,
and whether or not they recognise unions. They ensure that HR professionals
will have their hands full in determining the changes they need to make to
their organisations’ employee policies and practices.

The Government’s plans to introduce age discrimination legislation from
October 2006 is likely to have the greatest impact on Britain’s world of work.
The law will force a cultural sea change in attitudes about age-related matters
in the workplace.

Over recent years, employers have had to cope with the introduction of
legislation covering discrimination on the grounds of sex, race and disability,
and they will shortly have to do the same for discrimination on the grounds of
religious belief and sexual orientation. But it is the age discrimination
legislation that has much wider implications because every employee will be
affected by it.

It is encouraging that the Government is consulting on age discrimination
legislation well in advance of its implementation date. It has indicated that
it plans to have the final regulations laid before Parliament by the end of
2004.

It is imperative the Government adheres to this timetable because employers
will need all the time they can get between the finalisation of new laws and
their implementation.

In view of the difficult pension problems we now face in the UK, it is
inevitable that attention has so far concentrated on the impact age discrimination
legislation will have on retirement arrangements. This creates some real,
practical issues for companies.

The Government has clearly not decided whether to abolish employers’
mandatory retirement ages (except where they can be "objectively justified"),
or to enable employers to retire an employee at or after 70, without having to
jump through hoops to justify the decision.

In determining which approach to adopt, the Government must take into
account two important considerations. First, the new age discrimination law is
the result of the UK having to fall in line with an EU directive, so the
Government has to ensure its implementation is consistent with the approach
being adopted by other member states. If it fails, there is a serious danger that
British businesses will be disadvantaged by having to operate in a much more
complex regulatory environment than their European competitors.

Second, the Government must ensure that if it decides to abolish the
mandatory retirement age, except where it can be "objectively
justified", employers are provided with clear examples of the ‘objective
justifications’ they will have to make. This will enable organisations to
terminate the employment of their older workers in a fair and dignified manner,
without having to face the prospect of expensive employment tribunal claims.

New age discrimination law will certainly affect employers’ retirement
arrangements. But it will also impact on recruitment arrangements, redundancy
terms, pay and benefit packages, as well as training and pensions policies.

Until recently, the potential impact of new age discrimination legislation
on redundancy terms had been largely overlooked. However, the Government’s
announcement that it will also be radically changing the method of calculating
statutory redundancy pay has really opened up Pandora’s box on the issue.

The method of calculating statutory redundancy pay – using a formula based
on an employee’s age and service – has remained unchanged since it was
introduced by the Wilson Government in1965. Moreover, many companies with
supplementary redundancy payments often model them on the statutory formula.

The Government’s proposed changes in the formula for calculating statutory
redundancy pay will result in lower payouts for older workers. Inevitably,
employees will put pressure on their employers to make up the difference. Many
companies with supplementary redundancy payment arrangements will probably be
forced to reopen discussions with employee representatives on a subject that may
not have been on the agenda for some time.

The problems surrounding redundancy payments is just one indication of the
complex set of issues surrounding the implementation of new age discrimination
legislation.

It demonstrates how important it will now be to have a wide-ranging public
debate about the best way to implement this important piece of employment
legislation, so that it does not damage business competitiveness in the future.

By David Yeandle, Deputy director of employment affairs, Engineering
Employers’ Federation

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