The Employment Appeal Tribunal (EAT) has upheld an employment tribunal’s decision that, as at 31 December 2006, a law firm’s mandatory retirement age of 65 for partners was a proportionate means of achieving the legitimate aims of workforce planning and staff retention. The retirement age was objectively justified and did not amount to direct age discrimination against a partner who was required to retire on that date.

Whether an employer can justify mandatory retirement will still, to a large extent, depend on the nature of its business. Certain employers might be encouraged by the acceptance that the firm’s aims of retention and workforce planning could only be achieved by way of a mandatory retirement age, and that a range of retirement ages could potentially have been proportionate.

Businesses are generally prohibited from discriminating against an employee on the basis of their age (for example, choosing not to interview a candidate because their application suggests they are nearing retirement age is discriminatory). However, unlike other forms of discrimination, in certain circumstances, a business may be able to justify treating employees differently because of their age.

This business briefing highlights the most common exceptions.

Service-related benefits: A business is allowed to provide benefits which reward long service. For example, service-based rewards such as:

  • Extra days’ holiday
  • Incremental pay
  • Share options

However, if the benefit is affected by length of service of over five years, the business will need to be able to show that it fulfils a business need, such as encouraging loyalty.

National minimum wage: A business is entitled to follow the national minimum wage rates that exist for different categories of worker

Redundancy pay

  • Redundancy pay is potentially discriminatory as it is often calculated based on age or length of service. However, a redundancy scheme that is similar to the statutory redundancy pay will not be regarded as discriminatory. A statutory redundancy payment is calculated using a multiplier based on age and length of service
  • A redundancy scheme that aims to cushion older workers and reward loyalty, particularly where the scheme has the support of the workforce, will not be discriminatory

Insurance benefits: Businesses are entitled to provide employees with access to insurance or a related financial service up to the age of 65.

Provision of childcare facilities: A business can provide childcare facilities for employees caring for children in a particular age group (for example, a crèche). The business can also help employees with:

  • The payment of some or all of the cost of child care
  • Identifying a suitable person to provide child care

Retirement: There is no longer a default retirement age allowing a business to automatically retire all employees when they reach age 65. Although a business can still have a retirement age that applies to all employees, the business will need to be able to show that the compulsory retirement of an employee achieves a previously identified legitimate aim, or the retirement will amount to age discrimination. Legitimate aims can include:

  • Promoting access to employment for younger people
  • Efficient planning of the departure and recruitment of staff
  • Sharing employment opportunities fairly between the generations

Occupational requirements: In limited circumstances, the business can stipulate that, because of the nature of the job in question, only people in a particular age group can do the job.

Positive action: A business can take positive action if it thinks any of its employees are disadvantaged or under-represented because of their age. For example, if the majority of its employees are under the age of 40, the business could place a job advert encouraging applications from all age groups, especially applicants over the age of 40.

The content of this Business Briefing is for information only and does not constitute legal advice. It states the law as at August 2014. We recommend that specific professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this briefing.