The draft regulations on age discrimination raise a number of issues that need to be resolved, especially in relation to the provision of benefits. What are HR directors’ key concerns?
Alan Evans, HR director, NEC Europe
My concerns are focused on the relationship be-tween service and age – where there is generally a clear correlation (for example, long service awards, redundancy selection and payments).
On the recruitment side, I’m concerned about employee referral schemes, where the demographics of the people already employed can lead to more of the same. Also, web-based recruitment methods that can exclude some people from getting through the door if they are unable to work the technology.
Emma Blaney, Director of HR and operations, Informa Healthcare
My key concern at the moment is how to manage the consultation and implementation of a new redundancy formula (including negotiating with the union). The reason being that our current formula is based against age and this will become illegal.
In addition to this, we currently have private healthcare insurance (PHI) cover for all employees under 60 (our current retirement age). The cost to the business of covering people over 60 is exceptionally high, so if people opt to work past 60, they currently fall off this cover. Under the new legislation, would cost be a reasonable justification to why the PHI cover would cease at 60?
Olivia Cooper, Group HR director, AEA Technology
My main area of concern with the new age regulations is around avoiding discrimination in relation to benefits. I have been exploring the introduction of flexible benefits as one way of avoiding discrimination and a lawyer has confirmed that it is an excellent way of addressing this.
Initially, I was concerned about whether there would be any degree of discrimination on age grounds for older employees, whose benefits might cost more and therefore would be able to buy less with their flexible pot. Apparently, the answer to this is ‘no’ because all employees should be given the same pot (this would obviously depend on grade but everyone in the same grade would receive the same pot of money to spend on flexible benefits).
Richard Parker, HR director, Capio Healthcare
I believe that employers need to look beyond the obvious, such as recruitment and selection policies, and consider the impact of age discrimination on benefit provision. However, the current draft regulations are still a little vague, especially on the impact for pension schemes.
Hazel Stuart, Personnel director, Girls Day School Trust
My main concern with the draft regulations is the proposal that an employee can make a request to continue working as late as six weeks before the planned retirement date. By this time, a replacement will normally have been appointed, so this is a totally unworkable provision.
Anna Denton, solicitor in Morgan Cole’s employment, pensions and benefits practice
Will some benefits be unlawful?
Yes, many benefits, policies and procedures currently operated by employers will be potentially unlawful from the outset. What the employer may then be able to do is to bring the directly or indirectly discriminatory way it behaves within certain exemptions that are to be carved out in the legislation – for example, by showing it has a legitimate aim and that the conduct is proportionate or appropriate and necessary.
Specific examples are set out in paragraphs 7.1 and 7.2 of Morgan Cole’s white paper, Moving towards Diversity (www.morgan-cole.com/employment). However, the employer will need to step back and think about why it has certain policies in place or behaves in a certain way, and what the evidence is that shows it falls within the exemptions.
There are also rather large pathways through the legislation that are explained in section 9 of our paper, the ‘pay and benefits’ provisions. These will allow certain practices – for example, holiday accrual or other benefits accrual related to service or loyalty schemes to continue.
However, there are certain caveats to this – there is scope within the legislation for tribunals to be tough on employers by making them show evidence that they are seeking to achieve motivation of staff and have the empirical evidence to back this up. Few employers are likely to have this kind of evidence in place or to have undertaken any assessment to support this because they have never needed to. It could be very difficult to prove a link between an age discriminatory practice and successful retention and motivation of staff.
Age legislation is separate from the pensions reforms being considered by Adair Turner. The response in the age context has largely been a cop-out (ie, age discriminatory practices will be permitted in relation to pensions. Whether or not on the pensions-front employers will be able to mess about with contributions remains to be seen as and when pensions legislation gets amended.
Private healthcare insurance (PHI)
My view is that it is unlikely that cost would be a reasonable justification as to why PHI cover would cease at 60.
Tribunals traditionally take a dim view of any employer seeking to argue that cost justified them in making discriminatory decisions or acts or omissions. For example, you can’t say it costs me more to employ two part-timers job-sharing or it costs me more to employ a disabled person because they need special equipment so I won’t employ them.
What points should HR be considering in terms of their benefits provision?
- Review what is in place and assess the impact on age
- Once potentially discriminatory practices are identified, your next step will be to assess what, if any, pathways through the legislation the employer may be able to rely on
- In doing this, age-positive organisations may take the view they want to make changes so as to not be discriminatory
- Or, you will have to assess the risks and potential costs of relying on the exemptions and document your thought process so that if any claims are brought you have evidence to back up claims.