by Anne Lyne August-16-2021 in Employment Law
This article first appeared in the Business Post, 15 August 2021.
While Covid and housing may currently dominate the news headlines, one topic that is sure to come to the forefront again soon is the issue of the pension age gap.
The rise of the State Pension age from 66 to 67 was deferred by the Government last October. A report from the recently formed Pensions Commission, was due at the end of June but this has now been delayed until after the Dail summer recess.
The report is to address the sustainability and eligibility issues in respect of the State Pension and, the Social Insurance Fund. Notably, the report will also consider the issue of retirement ages in employment contracts that differ from the State Pension age.
Retirement Age
Some organisations have taken the step of no longer having a retirement age and employees can leave the workplace themselves at a time of their own choosing. The majority of employers in Ireland however continue to look to have a contractual retirement age.
In this context retirement age should be selected after careful consideration of the needs of the organisation and a documented consideration for its selection.
The Employment Equality Acts provide that an employer must justify the reasons for choosing the retirement age for the organisation or a particular cohort of employees to achieve a “legitimate aim”.
What does this mean?
The setting of the retirement age is not a function that should rest solely with HR. It is a decision that should include buy in from the senior management team to reflect the needs of the organisation. The considerations for selection should be documented and reviewed regularly.
An example of what might constitute a legitimate aim in a physically demanding role is that the employee is healthy and well to do the job. In establishing the appropriate age the employer should seek medical input into the setting of the retirement. The key is that the criteria are bespoke to the job demonstrating that the employer has considered all of the relevant factors.
Retirement policy & Code of Practice
The Code of Practice on Longer Working (S.I. No 600 of 2017) provides useful guidance on the principles and practices to follow in the run up to retirement, including responding to requests from employees to work beyond the contractual retirement age. The Code also provides that employers should consider developing appropriate policies and procedures to cater for age diverse workplaces, encouraging the retention of older workers and longer working.
What should be considered by an employer in the context of a retirement policy?
The policy should set out a process for retirement with the employee having a clear road map of what is expected leading up to retirement.
If an employer is considering agreeing to an employee working beyond the normal retirement age, there are a number of practical considerations. What impact will this have on the organisation and on the expectation of others? It should be clearly called out in the policy that each request is dealt with on its own merit, as otherwise there is a risk that the granting of a request can establish a precedent for other employees.
Bear in mind that many contractual benefits such as healthcare, pension contributions, ill health income protection, death in service, for example, are age related and are usually governed by separate polices which determine the date of cessation of eligibility to access those benefits. An employee who continues to work on past the compulsory retirement age, either on their existing contract or, on a fixed term contract may no longer be able to access these contractual benefits.
Will the employee be entitled to draw down their pension and continue to work? These are matters that will have to be addressed in conjunction with the pension provider. If a fixed -term contract is offered. What terms will be offered and for how long must all be considered.
It will be of interest to see the guidance from the Pensions Commission on bridging the pension age gap but as with most workplace matters a retirement policy that is communicated clearly to staff will assist with ensuring the retirement process works for employers and employees alike.
For more information on the issues raised above, or for any other employment law queries, please contact Anne Lyne alyne@hayes-solicitors.ie at Hayes solicitors LLP.
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About the Author
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Anne Lyne
Anne is a partner in the Employment team at Hayes solicitors. She has considerable experience advising and representing employers and employees on all aspects of the employment relationship from pre-employment matters to termination.