The Double Whammy: The Pensions Crisis and Age Discrimination

Developments
It is becoming increasingly clear that the working population are not going to be able to retire at 55 and enjoy that second home in the Algarve. A declining birth rate coupled with people living longer has highlighted the need for employers to be more strategic in relation to pension provision and work force planning.

This has been brought into sharp focus by the comments of Alan Pickering, who is on the board of the Pension Regulators and was the author of a 2002 government report on pensions reform. Mr Pickering recently suggested that the law should be changed to allow a one off opportunity for employers to re-negotiate past pension arrangements with employees. This is part of a general clarion call for flexibility for change as employers start to face the pension underfunding crisis.

Consequently, there is now a strong possibility that more employees will be seeking to extend their working life by looking to either stay in employment post 65 or join a new employer later on in their working life.

Undoubtedly, this raises opportunity for employers in that there will be a larger pool of available talent to select from. Concurrently, it may also cause new problems given that from October 2006, age discrimination legislation will be on the statute books in the form of the Employment Equality (Age) Regulations 2006 (the “Regulations”).

The Regulations seek to eliminate discrimination either on the grounds of age (or perceived age). The purpose of the Regulations is not only to protect the older worker but also extends to an attempt to eliminate discrimination on any age related factor.

Although employers will still be able to have mandatory retirement age of 65 and retirement will, in certain circumstances, constitute a fair reason for dismissal, employers will be required to go through a designated procedure before a person can be dismissed on retirement related grounds. To further strengthen the rights of the older worker, the present statutory cap preventing employees of 65+ from bringing claims for unfair dismissal will be removed.

Employers will still have some flexibility in that they will not have to accept applications from over 65's but it is highly likely that employers will receive more applications from older workers. The failure to appoint may be challenged by an applicant on the grounds of either direct or indirect discrimination. Employers will be able to defend such claims by either claiming that they have a genuine occupational requirement for a worker of a certain age/age group (in limited circumstances) or that the age related factor was a proportionate means of achieving a legitimate aim. For example that a worker of a certain age would not be able to perform certain tasks. This could be a difficult defence to run.

In many ways the Regulations will assist the government and employers in dealing with the pension crisis in that they can legitimately claim that older employees will have more opportunity to stay in employment for a longer period and therefore will be able to mitigate any loss incurred via less generous pension provision. Concurrently it will place new burdens and responsibilities on employers.

Summary

• There is a recognition that the work force will have to work longer which to some extent defuses the pensions time bomb.
• There are new opportunities for both employers and employees to work alongside each other.
• This will also bring new challenges for employers. They are not insurmountable but will need to be carefully managed by effective work force planning and sensitivity to the older worker whilst at the same time not excluding the younger generation.

Practical steps

• Employers should be preparing now by reviewing recruitment policies and applications forms to ensure that they do not discriminate on the grounds of age.
• Training on age discrimination issues should be rolled out now for new and existing staff.
• Employers should think laterally. If they believe that an older worker cannot perform a task then they should make sure this belief is not based on a stereotypical assumption about older workers.
• If employers do have workers who will be 65 in the next year then they should seek legal advice before relying on a contractual retirement age.

Should you require any further information on the impact of age discrimination on your organisation, please do not hesitate to contact Kevin McKernan, David Gibson and Yvonne Atherton in the Employment Unit. Their contact telephone number is 0191 233 9700.

Should you require any further information on training courses operated by Crutes Employment Team, please contact any of the above.

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