Handling and unravelling the complexity of retirement age in Ireland can be difficult. Retirement age in Ireland can sometimes be unclear. The usual retirement age up until recently was 65. The general assumption is that retirement age is the same as the state pension age. This makes sense.
However, the state pension age changed on 1 January 2014 to 66 and will increase incrementally to 67 years in 2021 and 68 years in 2028.
The change to age 66 means that there is an increased possibility that workers may find themselves in a situation of being obliged to retire and not being entitled to a state pension for a further 12 months.
Handling Retirement Age
Employers usually set their own retirement age. They do so in the contract of employment, through a policy (in the Staff Handbook for example) or by custom and practice.
If the employee’s contract does not provide for retirement at a given age, then the employee could remain employed indefinitely or until the employee sees fit to retire, and the employer would have limited scope to enforce their retirement. Thus, employers should always stipulate a retirement age in the contract of employment.
Certain professions do however have a statutory retirement age such as the Gardaí, the fire fighters and defence forces.
However, new legislation, passed back last December 2015 is changing all of this. The Equality (Miscellaneous Provisions) Act 2015, which came into effect in January 2016, makes a number of amendments to the equality legislation. The most obvious change is that regarding retirement age.
An employer is now required to objectively justify a compulsory retirement age.
Thus, retirement clauses in existing employment contracts will, for all intents and purposes, become void unless they adhere to this requirement.
If an employer forces an employee to retire and fails to comply with these amendments, employers could be brought to the Workplace Relations Commission (WRC) for unfair dismissal or age discrimination.
The onus will be on the employer to show a well-established practice regarding retirement age and one which meets the objective justification criteria.
The amendment brings the Irish position in line with EU Directive on equal treatment and case law from the Court of Justice of the European Union (CJEU) and Irish courts and tribunals.
What about using fixed-term contracts after the retirement age?
The offer of fixed-term contracts post retirement will also have to be objectively justified.
The new legislation does not prevent offering a worker past retirement age a fixed term contract after their retirement. However, the end of this contract must also be capable of objective justification.
Such requests should be dealt with on a case-by-case basis with employers being mindful that the granting of such fixed-term contracts may create a precedent for other employees who may request such extensions and may make it more difficult for employers to enforce their normal retirement age.
How can employers justify their retirement age?
An organisation must have well thought out and considered reasoning for the particular retirement ages which they apply to their business.
Reasons which have been accepted by courts and tribunals in the past include:
- health and safety reasons
- where particular work requires a degree of physicality
- succession planning (that is, the promotion of younger personnel through the business)
- ensuring motivation and dynamism through the increased prospect of promotion
- inter-generational fairness
- creating a balanced age structure in the workforce
However the objective reasons should be specific and relevant to your business or organisation. The above example reasons cannot be taken to apply to all businesses or organisations.
What can employers do to protect themselves from challenges to their retirement age?
Here are some examples of what employers can do to protect themselves from challenges to their retirement age.
- Ensure that a specific retirement age is included in all contracts of employment. By stipulating a retirement age at the commencement of the employment relationship, employers are putting the employees on notice from an early stage that the company’s retirement age is 65 (or whatever age is set for the business). If an employer wishes to have a mandatory retirement age, then it should be set out in a contract of employment.
- Ensure that you have an objective justification for the specific retirement age. The objective justification must be one which pursues a legitimate objective. The means of achieving that aim must be proportionate and reasonable.
- Stipulate in the contract clause that the company reserves the right to vary the retirement ages as the needs of the business evolve and develop.
- Pay great attention and be very careful of the repercussions of keeping an employee past the retirement age.