October 2012 wage rates and contributions and the final demise of the state retirement age

Posted on October 26, 2012 by Martin Malone

As most readers are no doubt aware national minimum wage rates were subject to their usual increase on 1 October. The main rate has increased from £6.08 to £6.19.

The rates for workers aged 16-17(£3.68) and 18-20 (£4.98) are unchanged this year.

The apprentice rate has increased from £2.60 to £2.65 and the accommodation offset (which employers providing accommodation can set off against the minimum wage) has increased from £4.73 to £4.82 per day.

The TUC has pointed out that those on the minimum wage (who are mainly women) will experience a net drop in spending power in real terms, taking into account that the rise in the main rate is 1.8% whereas RPI inflation is currently 2.9%. General Secretary Brendan Barber commented:

While we are pleased that Government has rejected the siren calls of some employers to freeze the minimum wage for adult workers and apprentices, these increases are still far below inflation and will leave the lowest-paid facing a real terms cut.

These new rates are a particular blow to younger people who will face the biggest hit on their living standards. There is no evidence that the minimum wage has had an adverse impact on young people’s employment so it is hard to see the logic behind their pay freeze.

[These] increases do not do enough to help hard-pressed families. We need a bolder increase next year otherwise the real incomes of minimum wage workers will continue to fall, along with consumer demand.

Also on 1 October auto-enrolment came into force for the biggest employers Continue reading →

compulsory retirement at 67 can be justified

Posted on September 17, 2012 by Martin Malone

Now that there is no default state retirement age, employers who have retained a compulsory retirement age must justify it. Sweden has retained a rule allowing employers to implement compulsory retirement for all workers at 67 – a rule that has been found to be justified by the European Court of Justice in Hörnfeldt v Posten Meddelande AB. The justifications accepted included:

– To reduce the risk of termination of employment in humiliating circumstances for older workers;
– Making it easier for young people to enter the labour market;
– Making it easier for people to work beyond 65 and provide a right, but not an obligation, to work up to 67;
– Allowing for pension schemes to be adjusted to take account of lifetime earnings;
– To allow for adjustments to reflect demographic changes.

Continue reading →

early retirement benefits transfer under TUPE

Posted on June 28, 2012 by Martin Malone

In any business sale, the buyer and seller are concerned to be as sure as they can be that rights and obligations will transfer to the buyer under TUPE – and in areas where there is doubt, will usually provide for an indemnity by the seller for any rights not accounted for in the purchase price. Generally, pension schemes fall outside the scope of TUPE, but parts of pension schemes which are not "benefits for old age, invalidity or survivors" do transfer.

In 2007 Procter & Gamble sold part of its business to Svenska Cellulosa Aktiebolaget SCA with employees based at its Manchester manufacturing site transferring to SCA under TUPE. The transferring employees were participating members of the Procter & Gamble pension fund, which allowed for early retirement benefits. There were no indemnities in the sale and purchase agreement, and SCA were very clear that they didn’t want to take on any pension liabilities. After the sale the question arose whether some early retirement benefits under the P&G scheme, which had a normal retirement age of 65 but allowed early retirement from age 55 transferred or not. There was no argument at all that TUPE did not apply – and the High Court therefore had to consider whether these benefits were excluded from TUPE with the standard old age retirement pensions or not. Continue reading →

indirect discrimination related to retirement is unlawful age discrimination

Posted on May 18, 2012 by Martin Malone

Another important age discrimination and retirement case this month is Homer v West Yorks Police, which concerned a senior police officer who became a legal adviser at the Police National Legal Database after retiring from the police aged 51. At the time he joined, there was no requirement for advisers to have a law degree, but the PNLD later introduced a new grading structure, which required a degree for promotion to the top grade, with the intention of improving recruitment and retention. At this point, at the age of 62, Mr Homer was allocated to the second highest grade. He made a complaint of indirect discrimination because he would be unable to complete a law degree before his planned retirement age of 65, and so could not get promotion. He failed in both the Employment Appeal Tribunal and in the Court of Appeal, because it was considered that the reason for the discrimination was not his age, but his impending retirement.

The Supreme Court rejected this approach: it did not make sense to compare those approaching retirement with those leaving for other reasons, over which they had a choice, with those faced with a compulsory retirement age, nor was it realistic to treat retirement as unrelated to age. Continue reading →

justification for direct age discrimination must be related to the general public interest

Posted on May 18, 2012 by Martin Malone

This month’s biggest employment law news stories have to be the Supreme Court’s two decisions on age discrimination in Seldon v Clarkson Wright & Jakes and Homer v West Yorks Police. Both give useful guidance about how cases on age discrimination will be considered from now on – but both leave questions to be considered further.

Seldon is a case relating to membership of a professional partnership, but the principles discussed will apply equally in employment cases. Put briefly, Mr Seldon, senior partner in a law firm, challenged a rule in in the partnership deed providing for compulsory retirement at age 65 as direct age discrimination. The partnership defended the rule on the basis that it was justified, that is, that the rule was a proportionate means of achieving a legitimate aim. Three of the reasons put forward as legitimate aims were accepted by the employment tribunal:

1 – retention of associates by ensuring that they have a chance to become partners within a reasonable time;
2 – facilitating workforce planning; and
3 – promoting a supportive culture by minimising the need to use performance procedures to expel partners.

At both Employment Appeal Tribunal and Court of Appeal levels it was considered that the mandatory retirement age was justified. Mr Seldon appealed to the Supreme Court, whose judgment surveyed the relevant European case law and drew out some general principles from it.

Continue reading →

how far can cost considerations be a justification for age discrimination?

Posted on April 26, 2012 by Martin Malone

Woodcock v Cumbria Primary Care Trust is a decision of the Court of Appeal addressing the extent to which the cost factor can justify discrimination on the grounds of age. It dealt with the case of an NHS chief executive, Mr Woodcock, whose post with a PCT "disappeared" during a reorganisation. He was warned of possible redundancy, and spent some time working on other short term projects whilst informal discussions took place about finding him an alternative job. However, formal consultation was not started for several months, nor was he given the year’s notice to which he was contractually entitled. A date for a consultation meeting was finally set in July 2007. However, as Mr Woodcock’s 49th birthday in June 2007 loomed, it dawned on someone at the PCT that if he was not given notice quickly, he would still be employed at the age of 50, at which point he would be entitled to take early retirement, at vast expense to the employer. A decision was taken to give him notice without waiting for consultation to happen, to avoid this cost.

Continue reading →

end of compulsory retirement, but..?

Posted on September 26, 2011 by Martin Malone

In April 2011 my colleague Kath Kelly wrote an article about the end of the statutory retirement age and highlighted some possible alternatives. The time is now upon us because this Friday 30 September is the last date on which notice given last April can take effect. Consequently, any attempts to impose compulsory retirement after this date and based on the state retirement age will be ineffective as well as being potentially discriminatory and constituting unfair dismissal.

However, Kath also highlighted possible alternatives to statutory retirement and one of these is an employer justified retirement age. Clarification in this respect has been provided by the European Court in the case of Prigge -v- Lufthansa. Continue reading →

Abolition of default retirement age

Posted on March 24, 2011 by Martin Malone

I wrote about the anomaly in the draft Regulations last month when I pointed out that it appeared that the new Regulations appeared to exclude the option to give notice to over 65s before the default age was abolished.

The Government announced in January that it was not going to back down on proposals to abolish the so called “default retirement age” on 1 October 2011. Many had argued that increasing the age from 65 to some higher age would be a better solution, on grounds of simplicity, of reducing the number of tribunal claims and of “humanity” (a default retirement age avoids the unpleasantness of having to tell an ageing employee that he is no longer up to the job). However that is not to be.

Under current law, provided the employer has complied with statutory conditions, notably giving between 6 and 12 months notice, he can require an employee to retire at age 65 or over without facing the risk of a tribunal claim. The regulations are due to come into effect on 6 April 2011 and will ensure that, subject to a transitional arrangements, employees whose dismissal takes effect on or after 1 October 2011 will be entitled to claim unfair dismissal and/or unlawful age discrimination even if they are aged 65 or over.

Although this basic position is clear the detail of the transitional arrangements was questionable. Originally the Government indicated that if the minimum 6 months’ notice expired on or before 30 September 2011, then all else being equal the current law would apply so that the 65 year old employee would not be able to complain to a tribunal. That appeared to mean the notice had to be given by 30 March 2011 even though the new Regulations would not be in force until 6 April. The draft regulations as issued have avoided the “retrospective legislation” implications that involved – but in doing seemed to have produced a different complication.

Under the transitional provisions set out in the initialbdraft regulations for an employer to take advantage of the current law the basic requirements were that (i) the employee must have their 65th birthday between 6 April 2011 and 30 September 2011 and (ii) the notice of dismissal must be given before 6 April 2011. As the notice of dismissal can be 12 months notice, it follows that provided the employee became 65 between 6 April and 30 September 2011, the dismissal itself could be set for any time up to 5 April 2012 if, in this example, notice was given on 5 April 2011. So far so good.

However there appeared to be an (in practice probably not very important) potential problem if the employee became 65 BEFORE 6 April 2011. The transitional arrangements could not then apply (as condition (i) above will not be fulfilled). The peculiar result would have been that, at least in theory, it would be possible for an employer to take advantage of existing law by giving 6 to 12 months’ notice before 6 April 2011 requiring an employee who has their 65th birthday in May or June 2011 to retire after 6 or 12 months but it would NOT be possible for him to do the same if the employee had their 65th birthday before 6 April 2011. By the time the notice given to the latter employee expired the current law would have been revoked by the new Regulations. The employer would not be able to take advantage of the transitional arrangements in the new Regulations with the result that that employee would be able, if the facts made it worth while, to sue the employer for unfair dismissal and/or unlawful age discrimination.

HOWEVER, the anomaly in the drafting has now been resolved. The applicable provisions are now as follows.

The last date for giving notice of intention to retire an employee under the statutory regime remains April 5 2011.

The statutory regime allows for a maximum of 12 months’ notice, so that a notice given before April 6 2011 could expire after September 30 2011. Under the new regulations:

the old provisions will apply to retirements of employees who are 65 on or before September 30 2011 provided that the employer has given notice of intention to retire on or before April 5 2011;
there remains some uncertainty as to the latest date on which such notice could expire – the usual rule is that the day on which notice is given is excluded from the time period, so the maximum notice of 12 months would expire on April 5 2012;
an employee could still make a request to continue working, but would need to do so on or before January 4 2012 (as more than three months’ notice is required); and
following such a request, an employer could agree to delay the retirement date by six months or less and still rely on the old provisions. This could mean that the latest retirements under the old regime are on October 5 2012. If a longer or indefinite extension is agreed, any subsequent retirement would need to be justified.

Our advice is that notice should be given on or before 5 April 2011. Work on the basis of the end of March with a view to ensuring that there is no risk of the employee not receiving the notice before the deadline. Wherever possible, give notice which is due to expire after six months, e.g. notice given on or before 31 March should be at least six months but expire on or before 30 September (again allowing a few days). Don’t extend the retirement date under any circumstances. By applying this approach, the existing Regulations can be relied on with minimal risk.

Can employers issue redundancy notices for over 65s before 6 April?

Posted on February 21, 2011 by Martin Malone

Based on Government announcements made in January this year and corresponding ACAS guidance, the almost universally held view was that employers needed to act before 6 April in order to issue notices to employees who are 65 or over to retire on or before the deadline for abolition of the default retirement age on 6 October. The reason for this is that, in order to act fairly under the current (but soon to be phased out) Regulations, an employer must give notice of retirement of at least six months. This allows time for the employee to object to the proposed retirement and for the employer to consider those objections (a necessary part of the process).

However, in an unexpected development which has caused a good deal of consternation, it seems from the draft regulations which have now been published that only those who turn 65 during the period from April to October can be forcibly retired and those already over 65 are already protected.This directly contradicts the previously announced position and it seems from the draft that, as a result, many notices already issued will have to be withdrawn.

The relevant section of the draft regulations reads as follows:

Transitional provisions
5.—(1) Despite regulations 2 to 4, the provisions mentioned in paragraph (2) continue to have effect in relation to the employment of a person if—
(a) notification in respect of that employment has been given under paragraph 2 or 4 of Schedule 6 to the Employment Equality (Age) Regulations 2006 before the date of the commencement of these Regulations, and
(b) that person will attain the age limit during the period that begins with that date and ends with 30th September 2011.

It is difficult to see how the regulations as drafted can conceivably cover those who are already 65 by the commencement of the transitional period. According to the explanatory note the new regulations will come into force on 6 April and that, at least, is consistent with the Government’s previous announcements.

End of the default retirement age

Posted on January 23, 2011 by Martin Malone

We have reported on several occasions over the last few months that the government is planning to scrap the default retirement age at age 65 but doubts were expressed about whether the change would be implemented as forecast. Those doubts have now been resolved as a result of the government’s announcement on 13 January that employers will no longer be able to force staff to retire at 65 from this October. Employment relations minister Ed Davey said that it was “great news” for older people, businesses and the economy.

The change means that from 6 April employers will no longer be able to issue notifications for compulsory retirement at the age of 65 using the default retirement age procedure. The current regulations require such notifications to be issued and for the employer to discuss the proposed retirement with the employee. However, the retirement can be imposed by the employer even if the employee disagrees.

Only one third of employers still apply compulsory retirement at age 65 but many have expressed concern about loss of the opportunity to implement retirements without the risk of facing claims for unfair dismissal and age discrimination. Interviewed on Radio 4′s Today programme Mr Davey sought to allay those fears by saying that guidelines would be issued to reassure employers that they can still conduct performance appraisals and fairly dismiss staff who are no longer able to perform their duties effectively. Of course, that means that there is room for uncertainty about capability and whether the determination is really age related. There also remains a good deal of concern about how employers will in practice demonstrate that unlawful discrimination is being avoided by using a proportionate means to achieve a legitimate aim.

John Cridland, director general designate of the CBI has highlighted the concerns. He said:

“The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance. Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.
“Employers accept that more people will want to work beyond 65 as the population ages, but the government has not recognised the fundamental question, which is how should employers manage retirement on the basis of a performance appraisal. This will be particularly acute in physically demanding sectors.”

So what does the change mean in practice for employers?

Employers must change their policies and procedures to remove those which rely on or refer to the default retirement age at 65.
Employers who want to retain a retirement age will have to give careful consideration to how it can be objectively justified. In most cases a blanket policy will fall foul of this requirement.
The “duty to consider” procedure needs to be phased out. From October this will play no part in arrangements for retirement.
Any employers who wish to rely on the current arrangements must start the process on or before 6 April.
Employers who wish to “retire” an employee will have to show a fair reason for dismissal.
Consideration needs to be given to reviewing and if necessary amending arrangements for performance appraisals and taking appropriate action where necessary. Confining appraisals and any corresponding dismissals to those around the current default retirement age is likely to be regarded as discriminatory.
There will inevitably be a significant increase in the number of employment tribunal claims resulting from the termination of employment of older employees.

As ever, our subscribers are more than welcome to contact us for advice and to make sure that all necessary changes are implemented in good time.