Employment tribunals may have only risen slightly during 2005, but legal experts predict a massive increase in claims after the age discrimination laws come into force in October. The message has got home quickly as far as recruitment is concerned – there are now very few job ads that now specify age – but in other areas, including reward, there is still some way to go.
The Employment Equality (Age) Regulations 2006 include a number of exemptions relating to retirement and service-related benefits and occupational pensions where, if an employee can objectively justify difference of treatment, they could have a case for a tribunal.
The impact the new laws will have on reward strategy is the cause of some confusion. “Some may argue that the type of benefit chosen may give grounds for discrimination – for example, a night out not appealing to an older worker,” explains Guy Guinan, employment partner at law firm Halliwells. “However, others claim this only generates a discriminatory perspective, asking: ‘Why shouldn’t the older employee enjoy the night out?'”
So which rewards could be perceived as potentially ageist and therefore unlawful? Examples include health screening over the age of 40, a gold watch on a 50th birthday, or redundancy procedures that include age as part of their selection criteria.
Julian Taylor, head of employment law training at law firm Simmons & Simmons, points out other thorny areas. “Care will be needed to ensure there isn’t a problem of exclusion around corporate hospitality or staff entertainment, such as sports, paint balling, ice skating, or go-karting,” he cautions. This could also include skiing trips or evenings at nightclubs.
All wrapped up?
Sharon Bolton, of Lancaster University Management School, cites dress-up and dress-down days, Oscar-type award ceremonies and sporting activity weekends as “prizes aimed at young people” in the “young person’s game” that she believes the UK workplace has become.
But Mark Childs, director of reward specialists Total Reward Systems, points out: “Personal preference perhaps plays a bigger part than age in how different people value a reward.” Ultimately, there will be rewards within any employer’s portfolio of more relevance to some individuals than others.
To be on the safe side, employers could offer more general perks such as vouchers, merchandise or travel rewards to their staff. Eleanor Dowling, principal at Mercer HR Consulting, suggests cinema vouchers as a safe bet, but laments the fact that employers may simply withdraw rewards such as nightclub trips. “This would seem unfair if it were just because of possible discrimination,” she says.
Length of service
Benefits linked to length of service, such as long-service awards, incentive programmes offering additional holiday entitlement to more senior employees, or extra maternity pay after a certain length of service, could also land employers in hot water. These could be perceived as indirectly discriminatory, as the younger the individual is, the less likely they are to qualify for the benefit.
However, the government has indicated that it does not want the new rules to dissuade companies from offering such benefits, by including an exemption where the length of service required to qualify for a benefit is up to five years.
“If the employer stipulates a longer period of service to qualify for a benefit, it will have to be justified,” says Guinan.
The new rules will also provide exemptions to allow occupational pension schemes, which by their nature have age-based rules, to continue to operate effectively.
But it may not be that simple. According to the October 2005 report, Tackling Age Discrimination in the Workplace, published by the Chartered Institute of Personnel and Development, 67% of organisations offer additional leave as a length-of-service benefit. About 45% expect to be able to justify this when the new legislation comes in, but 30% of respondents aren’t so sure.
Fortunately though, reward providers are already adapting their products and services in advance of the legislation, while more organisations are moving to implement flexible reward schemes.
If nothing else, the age legislation will encourage both HR and benefit practitioners to be more thoughtful and creative when designing benefit plans.
Top tips: making reward inclusive
- Go through the detail of the new legislation and check legal compliance.
- Audit your benefits to make sure they qualify for exemptions or can be justified.
- Establish a more flexible approach to reward and benefit, giving employees the opportunity to choose the elements of their reward packages that suit their current stage in life.
- Target rewards to your employees to keep them motivated while staying within the law.
- Focus on shorter-term employee achievements.
- Try to arrange social events that suit all ages, or provide a mix of events.
- Check the terms of risk benefits such as life assurance and permanent health insurance provision to ensure they continue up to age 65.
- Check pension scheme provisions.
- If necessary, take legal advice.