Smooth transition to retirement or working beyond retirement age – what employers should know

Shannon Chamber HR is a dedicated HR and Employment Law Support Service for members of Shannon Chamber provided in partnership with Adare Human Resource Management, experts in Employment Law, Industrial Relations, Human Resources and Health & Safety at preferential rates.

In this week’s feature Derek McKay, Managing Director of Adare Human Resource Management looks at the topic of retirement and how employers can help ensure it remains a smooth transition for the organisation and the employee.

Retirement age in Ireland

Plans by Government to increase the State pension age from 66 to 67 in the recent budget were put on hold. If the plan had gone ahead, Ireland would have joined just two other European countries with retirements ages of 67 or older; Italy and Greece.

A Commission on Pensions has also just been established by Minister for Social Protection. The Commission, which will be made up of various stakeholders, will submit its recommendations on a number of issues impacting pensions, including increasing the pension age.

However, there is no fixed retirement age set out in legislation in Ireland for private sector employees. Most organisations have a retirement policy in place, which is set out in the terms and conditions of employment. According to the Adare Human Resource Management 2020 HR Barometer report, now available to Linea members (and Shannon Chamber members), two thirds of organisations stated that they have a set retirement age of 65 and just over one in ten have a retirement age of 66.

However, in the public sector, civil servants have the option of working up to 70 if they so wish.

The issue of retirement became topical again recently when the Workplace Relations Commission (WRC) issued a specific Code of Practice in early 2018 as part of the Industrial Relations Act 1990 on longer working. The Code outlines best practice for handling retirements under certain headings including ‘Utilising the skills and experience of older workers’, ‘Objective justification of retirement’, ‘Standard retirement arrangements’ and ‘Requests to work’.

The Employment Equality Acts 1998-2015 also references age as one of the nine grounds that defines discrimination against an employee.

There have been a number of high-profile cases, such as Valerie Cox v RTE, where the WRC has ruled that the employee was discriminated against because of their age and has proved costly for an organisation; €50,000 in RTE’s case.

What if there’s no retirement age set in the employment contract

If there is no explicit retirement age set out in the Terms of Employment, then employers cannot force an employee to retire. However, employers will often rely on the rules of their occupational pension scheme and the annual benefit statements issued to employees to show that their employment was subject to a normal retirement age. It is important to distinguish between normal retirement age and normal pensionable age.

Normal pensionable age is defined as the earliest age at which a member of a pension scheme is entitled to receive benefits under the scheme rules. Since the normal retirement age and the normal pensionable age will not necessarily be the same for every employment, employers should exercise caution in placing reliance on pension scheme rules and benefit statements in seeking to establish the existence of a contractual retirement age for the employment concerned.

Employers may want to introduce a new compulsory retirement age or vary an existing retirement age, after the contract of employment has commenced. Where the employment contract has an express variation clause, the right of variation must be exercised reasonably. The introduction or variation of a compulsory retirement age requires the informed consent of the employee.

Working beyond retirement age

Given the changing demographics of the workforce, it is not unusual for someone to want to work beyond their contractual retirement age. The Code of Practice previously mentioned sets out the procedure to be used by employers when assessing any requests to work longer than the normal retirement age.

Any request should be made in writing to the employer at least three months ahead of the intended retirement date. This is written request is then followed up with a meeting between both the employer and employee. The employee can also bring a representative along to this meeting. The purpose of the meeting provides an opportunity for the employee to make their case and for the employer to carefully and fairly consider it.

The employer’s decision should be made in writing as soon as possible after the meeting.

If the employer grants the request to work beyond the retirement date, it should be clearly stated in the letter that the decision is based on the individual’s case only and does not impact or effect any other employee. This will minimise the risk of others looking to use this decision on their contractual rights. If a fixed-term contract is offered, the period should be specified setting out the timeframe and legal grounds underpinning the new contract.

If the decision is to refuse the request, then the grounds for the decision must be set out and communicated to the employee at a meeting. This helps provide the employee an opportunity to understand why the request was refused. It also demonstrates the employer did give the request serious consideration and the decision was based on factors impersonal to the employee.

Our recommendations

Firstly, we advise employers to ensure there is a retirement age specified in the Terms of Employment for all employees. Our 2020 HR Barometer report highlighted that one in ten organisations still do not have a retirement age specified in their contracts, which leaves them vulnerable to costly issues further down the line, should they seek to enforce retirement.

We also recommend that employers take requests to work beyond retirement age seriously and assess if there are good grounds to grant such requests. Older employees continue to have a lot to offer organisations and experience and expertise in particular sectors are not always easy to find. Under the Equality (Miscellaneous Provisions) Act 2015, any fixed term contract offered post-retirement must be objectively justified.

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.

Finally, we recommend that the employer examine all potential options available such as part-time working if they believe this is a more suitable arrangement for all parties.

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