The world of work is ever changing, and an aspect of the employment journey which we are seeing an increase in the queries to ISME, is on how to deal with the transition to an employee’s retirement. Seeking to work past retirement age is a new area that has emerged with longer working lives now being in some incidences a choice and for others a necessity.
As our society ages and those wishing to work past traditional retirement age (i.e. 65 years of age) is forecast to grow, it is important to keep in mind best practice. With the advances in health and medicines the worker’s demographic is changing which brings a lot of positives and in turn its own challenges to navigate.
The government has advised that the State retirement age will remain at 66 years for the foreseeable future, however there are other proposed changes on the table namely:
- Employers will not have the ability to fix the retirement age below 66 years of age (early stages of draft legislation)
- Flexible longer working which will give workers the option to postpone their retirement until 70 years of age for a monetary incentive (early stages of draft legislation)
- Pension Auto-enrolment – draft legislation is quickly going through the Oireachtas with an ambitious date of commencement of 1st January 2024.
Currently, there are over 750,00 workers in Ireland without pension savings, this means they may only have the State Pension, (currently €265 per week), to retire on – for many a huge drop in their living standards when they retire.
As the Pension Auto-enrolment aspect is the furthest down the tracks here’s what we know so far:
- Workers aged between 23-60 years that do not currently have an Occupational Pension Plan will be placed into the State Pension Auto-enrolment system
- Workers will have the option to “opt out” if they wish to do so
- Central Processing Agency (CPA) is being set up for all pension queries
- The scheme will be phased in over the next 10 years initially from 1.5% up to 6% contribution
- For every €3 saved, the government will put in €1, up to a limit. So, if a worker were to save €100 a month, the government will add another €33. An employer will also have to gradually match any contributions made by up to 6% of salary. This will start off at just 1.5% but will gradually increase to 6% by year 10.
The risk of discrimination by way of ageism underpins all the employer’s actions in relation to handling an employee’s retirement. The law facilitates the imposition of mandatory retirement ages in people’s contracts of employment.
An employer must decide upon their company’s own contractual retirement age based on 2 conditions:
- There is objective justification to meet a legitimate aim and the means of achieving that aim
- The legitimate aim is appropriate and necessary
Further to these 2 conditions the retirement age chosen can be industry and sector specific. The main point is that whatever retirement age your business decides upon, you can stand over
the reasoning why.
The Code of Practice on Longer Working assists with this process by outlining the following reasons why a company may choose to act on their chosen retirement age:
- Succession planning
- Promotional opportunities opened up
- Intergenerational fairness
- Ensuring a safe place to work
Key questions that all employers should ask regarding their own business:
- Do we have a contractual company retirement age in place? This can be expressly stated in contracts of employment or alternatively by way of custom and practice?
- Can we stand over the reasons for choosing this age?
- Proportionality test – is the balance correct for this age to work for both the company’s needs and the employee’s need to earn a living?
- Is there fair process in line with the Code of Practice when one of your employees is approaching this age?
What to do if a Request for Long Working comes in?
The government established a Code of Practice referred to above around the issue of longer working, giving guidance and setting out industrial relations best practice in managing the engagement between employers and employees in the run up to retirement age.
If you have an employee coming up to retirement age or you yourself are considering whether or not to retire, we would advise reviewing the Code of Practice on Longer Working which will outline a good practice process for your business here.
Employers need to have a consistent way to retain older workers and deal with requests to continue to work beyond the traditional retirement age, within the context of the changing statutory and legal framework with regard to retirement and pension entitlements.
For further information or support on retirement, ISME Members can contact the HR Advice line via [email protected] or 01 6622755