Age regulations

Will we still be able to set our own retirement ages?

Yes. According to the draft Employment Equality (Age) Regulations, compulsory retirement ages will not be unlawful per se.

Employers will still be able to set their own retirement ages, but if it is below the national default retirement age of 65, then any dismissal will be unlawful under the age regulations unless it can be objectively justified. If the retirement age is at or above the default retirement age of 65, then any dismissal will be lawful under the regulations.

Whether or not the dismissal is fair under the Employment Rights Act 1996 will depend, to a large extent, on whether or not the employer has followed the new “duty to consider” procedure.

Employers may wish to dispense with a compulsory retirement age altogether. But if you want to change your organisation’s contractual retirement age, you will need to consult about the change, as this will amount to a variation of an employee’s contract of employment.

What changes should we make to our contractual redundancy scheme?

You should review your redundancy policy in light of the government’s proposed changes to the statutory scheme (in the draft regulations) to ensure it is age-compliant. In particular, you should make sure that:

• any lower or upper age limits on payment entitlements are removed unless there is a good reason for them
  
• any ‘multiplier’ based on wide age brackets is removed unless there is a good reason for it. For example, if a scheme offers employees four weeks’ pay for each year of employment between the ages of 42 and 64, two weeks’ pay for each year of employment between the ages of 22 and 41 and one week’s pay for each year of employment under the age of 21, these wide age brackets will have to be removed. However, if it simply offers two weeks’ pay for each year of employment, this will not be a problem, as it does not differentiate on grounds of age
  
• any selection criteria are objective and non-discriminatory. In particular, age should not be used as a criterion for selecting employees for redundancy. A ‘last in/first out’ policy is likely to affect a greater number of younger employees, and therefore may indirectly discriminate on the grounds of age.

The government is preserving the two-year qualifying period for entitlement to a statutory redundancy payment, and the requirement to take into account an employee’s length of service when calculating any such payment. Any contractual scheme will remain lawful to the extent it mirrors these requirements.

Any proposed changes to a contractual scheme will require consultation.

What are the implications for pension schemes?

The regulations will have very little impact on occupational pension schemes, as most age-related rules or practices will be exempt. However, employers and trustees/managers of an occupational pension scheme should carry out a review of the scheme to identify any age-related provisions, and ensure they fall within one of the specific exemptions, or can be objectively justified.

Will the statutory dismissal procedures apply to dismissals on grounds of retirement?

According to the consultation document, the statutory dismissal procedure will not apply to retirement dismissals. Employers will simply have to follow the new “duty to consider” procedure.