Redundancy and Retirement Age

Redundancy and the Over Sixty-Fives

The default retirement age of 65 was abolished in the UK in 2011. Employers can only impose a compulsory retirement age on employees if it can be objectively justified as a genuine occupational requirement.  Compulsory retirement for air traffic controllers and policemen may be possible to justify, but  not for the majority of office-based jobs.

Statutory Redundancy Payments: With the abolition of the compulsory retirement age, the tapering off of statutory redundancy payments for those aged 64 and above was also removed. Over sixty-fives will therefore still be eligible for a statutory redundancy payment.

For example, someone  aged 70, employed for thirty years, and earning £385 pw (£20,000 pa) would be entitled to a statutory redundancy payment of £11,550 and 12 weeks statutory notice.

Someone aged 75, employed for 15 years and earning £600 would be entitled to a statutory redundancy payment of £11,002.50 (applying the current cap of £489 pw) and 12 weeks statutory notice.

Redundancy Selection Criteria: Some employers may invite people to apply for voluntary redundancy, and of course if someone over sixty-five volunteers, then that will not be a problem.  However will it be discriminatory to use age as a basis on which to select employees for redundancy?

The Equality Act 2010 states at section 13(2) that it will be direct discrimination to select someone for redundancy on the basis of their age, unless can show that the treatment is a ‘proportionate means of achieving a legitimate aim.’ An employer could argue that if employee qualifies for his pension, and the business is served by promoting the careers of younger staff who may intend to remain employed for longer, a legitimate aim will be achieved. However this could be open to challenge, and for this reason many employers would rather not rely on age.

Take a look at the following redundancy selection score card for someone aged 67, employed for 15 years:

This invites a potential Equality Act challenges from older staff on the basis of the negative score for years for criteria B and D, as older employees are more likely to have ailments requiring time off sick.  Younger staff (with less than three years’ service) may challenge it on the grounds that criteria A and C put them at a disadvantage.

For this reason, an increasing number of employers prefer to simply invite all staff at risk of redundancy to apply for, and be interviewed for, the remaining positions within the team / organisation. On the face of it, interviewers will only interview on the basis of capability to perform the new role. Some managers may then skew the results to select the person they already decided they wanted. Such prejudgement would be both unfair and potentially discriminatory. Proving that though may be difficult.

Enhanced Redundancy Payments: Many employers offer enhanced redundancy payments. Can or should employers reduce enhanced payments for the over sixty-fives?  In this case the employer would need to argue that doing so was a proportionate means of achieving a legitimate aim, as the object of the enhanced payment was to help the ex-employee until they either a) get a new job or b) qualify for their pension. However an over sixty-five without a decent pension may argue that they won’t be able to get another job and won’t be able to survive on their state pension.

In Odar v Baxter Deutschland  the European Court of Justice held that it was not discriminatory on the grounds of age to taper and reduce redundancy compensation payments for employees aged over 54, by taking into account the earliest date from which they could receive a state pension. The ECJ accepted that the legitimate policy aim was to protect younger workers and to apply limited resources to them.  Older employees could instead take advantage of the state pension.

However, the ECJ concluded that formula was indirect disability discrimination and could not be justified for that reason. The Odar case emphasises the perils that employers face when trying to apply such age-related criteria.

Conclusion: Few employers will be brave enough to admit to relying on age as a criteria for selecting for redundancy and if they do so, it will be under the radar. On the other hand some older employees may be more willing to volunteer for redundancy, especially if they think they are going to get an enhanced redundancy payment.

James Carmody. Reculver Solicitors advise on redundancy, age discrimination, unfair dismissal and other employment matters and are based in London WC1. Reculver has developed a Redundancy and unfair dismissal Calculator tool which the statutory redundancy payment; the statutory notice period, payment in lieu of notice and a possible unfair dismissal award if out of work for six months.