I am confused about what effect the new age discrimination regulations will have on redundancy pay. What can we do to avoid age discrimination claims in relation to redundancy payments?
At present, employers do not have to pay their employees the statutory minimum redundancy payment if they are under 18 or over 65 (or after the company’s normal retirement age, if this is lower). This means that unless a redundancy payment is included in the employee’s employment contract, they will not receive any redundancy pay.
The new rules will apply to redundancies carried out after 1 October 2006, and will mean age will not matter for entitlement to statutory minimum redundancy pay. Currently, these awards are determined using a multiplier on a number of weeks’ pay, ranging from half a week for younger employees to one-and-a-half weeks for older workers. The number of years of service is also taken into account. However, when the age regulations come into force, the same number of weeks’ pay will be used to calculate redundancy pay for all ages of employee.
In adopting this new method of calculation, all payments will be calculated in the same way, irrespective of an employee’s age.
Interestingly however, the potentially indirectly discriminatory two-year qualifying period (to be eligible for a redundancy payment) will remain.
Many employers have contractual redundancy policies with enhanced benefits. You should check yours to ensure it contains no discriminatory elements – such as an upper age limit – that you cannot objectively justify.
Alison Loveday, head of employment law, Berg Legal
