Can Employers Set Compulsory Retirement Ages
There is no statutory retirement age in Ireland. Up until recently the default position for many employers was to retire employees once they turned 65, however this may no longer be possible.
Legislation came into force in Ireland in 2016 which stated that compulsory retirement ages may only be set where they can be objectively justified. This means that employers can compulsorily retire an employee if they are able to justify their course of action.
Failure to have appropriate justification in place could leave employers open to an age discrimination claim.
Setting Objective Justification
What is an objective justification will very much depend on the role and the Company, however as guidance, some of the reasons which have been accepted by the courts in the past include;
- Health & Safety: It may be justifiable to have mandatory retirement ages for employees who work in jobs which are physically demanding.
- Succession Planning and establishing an age balance in the workforce: Employers need to plan for the future in order to ensure that they have the right people in place to support the business into the future. Mandatory retirement ages can promote this.
- Encourage the recruitment and promotion of younger people: It has been successfully argued that mandatory retirement ages encourage employees to stay with, and progress within an organization and to motivate employees by the prospect of being promoted into more senior roles.
Employers may also wish to consider the State Pension age when looking at retirement ages. In January 2014 the State Pension age was increased from 65 to 66. This will be further increased to 67 by 2021 and 68 by 2028. If an employee is retired and is not immediately eligible for the State Pension this could lead to the company’s retirement age being challenged.
Fixed Term Contracts
Fixed term contracts are frequently used where an employee reaches retirement age but wishes to continue working. Under the new legislation, if offering a fixed term contract after retirement employers will also have to show objective justification for the termination of employment at the point of expiry of the fixed term contract.
What do employers need to do?
- Employers are well advised to review their contracts of employment.
- If a retirement age is included employers should ensure that there is objective justification for including that retirement age. Best practice suggests having more than one objective justification for a retirement age, which will help build a strong defence in any age discrimination claims.
- Employers should reserve the right to review and amend the retirement age based on business needs.
Bright Contracts - Employment Contracts and Handbooks
