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The demographic time bomb was a much discussed public debate in the 1980’s and 90’s. There was a recognition that the average age of the workforce in the UK was increasing which would mean that the number of ‘new entrants’ to the working population was decreasing – there would be fewer people of working age to support an increasing number of those in retirement. In the last few years this issue has turned into the controversial pension’s debate. The UK is not alone in the EC with the problem.

With an aging working population there was increasing concern that older workers were being denied, or losing, employment opportunities even though they were economically active and this was to the detriment of UK plc.

Businesses that take a positive approach to diversity generally are also likely to do better than their competitors. Research has also shown that organisations with high quality Human Resources or Personnel systems – in which equality plays its part – deliver better products and services and ultimately better shareholder value (Dex and Scheibl, Business Performance and Family Friendly Policies, Journal of Management, Vol 24 1999; and The HR Scorecard, Becker, Huselid, Ulrich 2001).

The Government consulted on proposals to legislate on age discrimination in “Coming of Age” in 2005, after a previous “Age Matters” consultation held in 2003. The Coming of Age consultation ended on 17 October. Subject to Parliamentary approval the legislation will come into force on 1 October 2006.

The draft regulations – Employment Equality (Age) Regulations 2006:

1. as with other equality legislation, the age regulations will, generally, prohibit direct and indirect discrimination, victimisation and harassment on the grounds of age or apparent age
2. prohibit unjustified age discrimination in employment and vocational training
3. require employers who set their retirement age below the default age of 65 to justify or change it
4. introduce a new duty on employers to consider an employee’s request to continue working beyond retirement
5. require employers to inform employees in writing, and at least 6 months in advance, of their intended retirement date. This will allow people to plan for their retirement
6. remove the upper age limit for unfair dismissal and redundancy rights, giving older workers the same rights to claim unfair dismissal or receive a redundancy payment as younger workers, unless there is a genuine retirement
7. include provisions relating to service related benefits and occupational pensions
8. remove the age limits for Statutory Sick Pay, Statutory Maternity Pay, Statutory Adoption Pay and Statutory Paternity Pay.

What does it mean in practice?

Employers will still be able to set their own retirement ages, but if it is below the national default retirement age of 65, then any dismissal will be unlawful under the age regulations unless it can be objectively justified. If the retirement age is at or above the default retirement age of 65, then any dismissal will be lawful under the regulations.
Redundancy schemes should have any lower or upper age limits on payment entitlements removed. Such schemes such also not have wide age bands giving different multipliers of a week’s pay. Age should not be used as a criterion for selection for redundancy.
Employers must introduce a new procedure to allow employees to request working beyond a compulsory retirement age. The employer must notify the employee in writing up to twelve months before the intended retirement date of their right to request on-going employment. The employer has a duty to consider the request seriously. Failure to inform of the ‘right to request’ will lead to compensation of up to eight weeks’ pay. Informing an employee less than two weeks in advance (or not at all) will result in automatic unfair dismissal.

What are the implications for HR Systems?

Modification to rules calculating the expected retirement date and any relevant automatic diary entries may be required.
Review of pay structures which are potentially indirectly discriminatory because they are generally based on length of service or seniority.
Modification of calculations for redundancy payments.
Amend redundancy selection criteria.
Amend employment terms and conditions or statements to reflect the default or other retirement age.
Apply a standard mail-merge letter to be sent to potential retirees at least 6 months before expected retirement date.
Be able to generate management information (reports, graphs, spreadsheets) to monitor and demonstrate that regulations and policies are effective e.g. training provided by age band, promotions by age band, recruitment stages by applicant age band, ability to meet qualification criteria by age band

What else needs to be considered?

1. That changes to contractual benefits such as redundancy schemes or retirement may require consultation and agreement as they could amount to a variation of an employment contract.
2. That the Directive, and therefore the Regulations, provides for the objective justification of differences of treatment on the grounds of age so that an aged-based difference in treatment is not unlawful discrimination where it is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.
3. That unlike sex and race discrimination legislation the Regulations do not apply to discrimination in the provision of goods and services. Benefits and services that discriminate on the grounds of age can continue to be provided, for example concessionary pricing for students or older people.

You may have noticed that these are ‘regulations’ rather than an Act of Parliament. The early anti-discrimination laws were Acts – Race Relations Act, Equal Pay Act, Sex Discrimination Act. These regulations are produced under the authority of the European Communities Act 1972.
What should you do next?

There are clearly a lot of issues for consideration and possible action, many are dependant on the policies and procedures in operation within your organisation but some may have an impact on how you are using your HR system.