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The topic of retirement age raised its head again last week when it was announced that the issue of the “gap” year between those retiring at 65 but unable to claim the State Pension until they turned 66 was being dealt with. Previously those retired at 65, usually employees with an employment contract that stipulated that they retire at 65, had to sign on the live register to claim Job Seeker’s Allowance and prove that they were genuinely looking for work.

However, the solution, which simply allows those retiring at 65 to claim Job Seekers without the need to sign-on or look for work still leaves people €45 per week worse off than those in receipt of the State pension.

Derek McKay, Managing Director of Adare Human Resource Management looks at the protections afforded to employees through the employment equality legislation and the code of practice on longer working, and what employers need to consider if an employee wants to work beyond the retirement age set out in their contracts (assuming a retirement age term exists).

Increasing State pension age

A study released last week highlighted that the State pension liabilities is rising at a rate of 10% each year[1] and pensions now account for 38% of the total social welfare budget[2]. Given the aging population, it is no surprise that this cost will continue to increase year-on-year. In an effort to address the issue, Government had plans to further increase the pension age this year to 67 and then again to 68 in 2028. However, the scheduled increase this year has been suspended and the Pension Commission has launched a public consultation process to look at the future sustainability of the pension system, including qualifying retirement age.

As part of the Adare Human Resource Management HR Barometer, we have been mapping retirement age among Irish businesses and our research has shown that there has not been any significant shift over the last couple of years. The vast majority of businesses (66%) we spoke with in 2020 state 65 as their stipulated retirement age, with just 12% stating 67. And, interestingly given Government plans, three quarters have no intention of increasing retirement age.

Currently, there is no compulsory retirement age for Irish employees. But one can be outlined in the terms and conditions of employment and employers can enforce it if it can be objectively justified and there is a sound business reason to do so.

Employees looking to work longer

The changing demographics of Irish workers, along with the financial necessity, means that many people want to continue to work beyond 65. We would advise employers to take any request to work longer under careful consideration given the potential implications in terms of compliance with employment legislation.

While there is provision in the Employment Equality Acts, 1998 – 2015 that states that fixing a retirement age does not constitute age discrimination, there have been several successful WRC claims made in favour of employees who have been treated unfairly due to their age.

The Workplace Relations Commission prepared a Code of Practice on Longer Working back in 2018 to help provide guidance for employers when managing retirement among employees. The areas of guidance are:

1. Utilising the skills and experience of older employers
2. Objective justification
3. Retirement arrangements
4. Dealing with requests to work longer

Utilising skills and experience

The Codes sets out some measures that can be taken by employers to use the skills and experience of older employees, including training on age diversity, encouraging the sharing of knowledge and experience, ensuring there is no age-related bias and encouraging a culture where there is a need to train employees of all ages.

Objective justification

Any compulsory retirement age is not discriminatory if it can be justified objectively “both by the existence of a legitimate aim and evidence that the means of achieving that aim is appropriate and necessary’. This could include:

• Intergenerational fairness (allowing younger workers to progress);
• Motivation and dynamism through the increased prospect of promotion;
• Health and Safety (generally in more safety critical occupations);
• Creation of a balanced age structure in the workforce;
• Personal and professional dignity (avoiding capability issues with older Employees); or
• Succession planning.

Retirement arrangements

The Code sets out guidance for employers on how to support the employee’s transition to retirement including:

• Opening a dialogue with individual employees on their plans around retirement, particularly where no contractual retirement age exists, so that there is a clear understanding between the parties
• Providing supports such as, pre-retirement courses, flexible working arrangements and/or counselling to facilitate the transition to retirement
• Providing clear information to employees on retirement procedures, both at recruitment stage and at regular intervals during employment

Request for longer working

Any request should be considered carefully as already stated and employers should consider the following when assessing any requests:

• Grounds or reasons the request should be accepted or refused
• The factors that are impersonal to the employ
• What form would any extensions might take (fixed term contract, etc)
• And, whether flexible working might be more appropriate

The Code also sets out the process and timeframe that any request should be considered, including outlining the procedure for meeting with the employee, granting or refusing the request in writing and clearly stating the reasons for the decision. 

Conclusion

We always advise that a retirement age is specified in the Terms of Employment for all employees. This provides a clear understanding from the outset of the relationship.

But if a request for longer working is submitted, it should be considered and assessed on the merits of the employee and the needs of the business. Employers need to bear in mind that every employee must be treated fairly and consistently when addressing future requests as well as the potential impacts on existing contracts.

And, look at all available options in terms of the employment relationship.

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Contact:
For further information on the HR and Employment Law support services provided, to arrange a meeting or to receive a quote, contact the team at Shannon Chamber – admin@shannonchamber.ie / 061 360 611

[1] Irish Times, 10^th February 2021 – “State pension liabilities rising 10% a year, CSO study finds”

[2] RTE.ie, 10^th February 2021 – “Pension consultation launched on future of State pension.”