The new age law says that companies operating an age-based pay structure other than that enshrined in National Minimum Wage (NMW) legislation are not protected by the regulations.
Increasing the pay of younger workers to that of the higher age group will be expensive and reducing their pay would be perverse. So if a young person is paid more than the NMW, they will be entitled to claim age discrimination if an older worker is paid more – unless it is objectively justified.
How can it be justified? Surely, employers who pay young employees more than the NMW, but less than older employees doing the same job, should not be penalised?
The law on 1 October 2006 will be more subtle than this. Employers will still be able to use length of service as a reason for giving workers different benefits (Regulation 32(1) of the Age Discrimination Regulations). Different benefits might include paid holiday, company sick pay and pension payments.
But employers need to beware that, where a worker who has more than five years’ service is disadvantaged, they will need to show that it reasonably appeared to them that the award of the benefit fulfilled a business need (such as encouraging loyalty or motivation or rewarding the experience of some or all of its workers). This appears to be a subjective test and looks, therefore, like it will be reasonably easy to satisfy.
Separate rules apply to enhanced redundancy payments. The employer can still enhance redundancy payments under the new rules (for example, by using an actual week’s salary rather than the statutory figure of 290 per week, or by using a higher multiplier than provided for by statute) provided this otherwise follows the statutory framework, which provides for different redundancy payments depending on the age band into which the employee falls.
By Meriel Schindler, head of employment, Withers
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