Whilst every employee has to cope with the fact that they are getting older and they can do nothing about it, every employer has to be able to deal with the retirement of all of its employees.
Although there is no legal requirement in Jersey, it is advisable to have a retirement policy in place. Having such a policy will remove at least some uncertainty that your employees may have as they approach retirement age.
Currently in Jersey, "pensionable age" is defined as aged 65 in the Social Security (Jersey) Law 1974, but of course this may increase in the future.
Part of any Staff Handbook or Employee Guide should include a retirement policy, which would state either that you require staff to retire at the normal retiring age for a person in their position, or at the statutory retirement age, or pensionable age, or as in England, that there is no fixed retirement age but it is acknowledged that this will be reviewed and may change subsequently. Whilst many large organisations and international businesses may already have such a policy, many SMEs and newly formed businesses may not yet have given the process for the retirement of its staff, sufficient, or indeed any, consideration. Those with an existing retirement policy in place need to ensure that they apply it and in order to minimise the chance of a claim being made to the Employment Tribunal ("the Tribunal"), they need to ensure that they are applying the policy consistently.
In June 2013, the Tribunal considered a claim for unfair dismissal initiated by a retired 65 year old man (Mr N) against his former employer, a shipping company, who was made to retire shortly after his 65th birthday. Part of the evidence given included the fact that despite the company having a policy to retire staff at their 65th birthday, a number of employees had been allowed to continue to work on beyond their 65th birthdays for varying durations. The inconsistency in the application of the policy seems to have been the motivating factor for Mr N to bring his claim. He felt that he was being treated less favourably than other employees; the company were insisting that he retire when others had been allowed to work on.
Mr N's claim for unfair dismissal failed because Article 74(1) of the Employment (Jersey) Law 2003 ("the Law") provides an upper age limit of 65 in respect of such claims.
Whilst Article 61 of the Law provides for the right for an employee not to be unfairly dismissed, this does not apply in cases where an employee has attained normal retiring age for a person in that position with that employer, or in any other case, at pensionable age.
Although the company did not have to pay Mr N an award for unfair dismissal (because of the effect of Article 74), by not strictly and consistently applying its own retirement policy, it ended up in a dispute, found itself having to defend its previous decisions and have its actions scrutinised by the Tribunal.
SUMMARY OF THE LEGAL POSITION
Except in the limited situations provided under the Law, the right to claim unfair dismissal is not available to an employee who, on or before the effective date of termination, has reached retirement age in accordance with any of the criteria below:
a) where men and women have the same retirement age, the normal retirement age for the position within the undertaking.
b) in an organisation where there are different retirement ages for men and women, when the higher of the two normal retirement ages for the position has been reached.
c) In any other case, when pensionable age has been reached as defined under the Social Security (Jersey) Law 1974.
SOME KEY CONSIDERATIONS FOR EMPLOYERS
(i) On an on-going basis
Ask, consult or discuss with all employees about their employment plans and desires for the future – where do you see yourself in five years' time? And in ten years' time? However, as any employee is entitled to change their mind and choose to retire earlier than pensionable age, you should not rely too heavily on their responses when undertaking your own business planning and budgeting.
(ii) In the year before the employee is due to Retire
When you have an employee who is approaching retirement age, you should write to them in advance of their pending birthday (perhaps 6 months or so before this), to inform them that you will be requiring them to retire at their next birthday (usually their 65th).
Then, closer to their birthday (perhaps the month prior to their birthday), you should again write to the employee to remind them of their retirement and inform them of the date of their last working day, when they will receive their final pay and set out any other details of actions that will need to be taken by you or by them, on or before their last working day.
You need to be alive to the fact that it may be difficult for some employees to accept that they are coming to the end of their working life or career, and where possible assist in making their transition to post working life as seamless as possible. You also want to minimise the effect of their retirement on your business.
(iii) What if you overlook the employee's "big" birthday and continue to employ them beyond retirement age ?
In the absence of you applying a retirement policy or their contract stating a retirement age, or you informing the employee that you have terminated their employment due to their reaching pensionable age, then the employment relationship will continue. If you subsequently dismiss them, although they would not succeed with any claim for unfair dismissal, they would be entitled to all their contractual rights and benefits, including bonuses and commissions.
(iv) What if an employee requests to work on beyond the normal retiring age?
You need to carefully assess their position and the demands of the duties associated with their role, before providing a written response to them which confirms your decision.
You need to consider whether there is any additional health risk for someone who is older than the normal retiring age being allowed to continue to undertake their duties. If they do a physical demanding or manual job, even if the employee appears to be very fit and healthy, you should consider taking medical advice before agreeing to continue to employ them.
You also need to check the terms and conditions of your insurance policies (employers' liability, public liability and professional indemnity) to check they would still be covered in the event of a claim being made involving them or their work.
(v) What if you want to retain the skills or experience of an older employee?
You may have previously invested a lot of time and expense in training a senior employee over the years and may feel that you are not ready to lose that just yet.
Essentially, there are two options.
First, you can offer the retired employee a new fixed term contract, which would take effect after they have retired. This need not be full time or to involve all of the same duties that they undertook prior to retirement. It may suit you, as well as them, for them to work reduced hours or to allow them to work more flexibly than they previously did.
Alternatively, the retired employee could be offered a service contract or consultancy agreement. This would involve a document being drafted and signed by both parties which sets out the various agreed terms including defining the services that they would provide to your business. If there is any uncertainty on your part at that time about how busy your business may be in the short to medium term, this may be the preferred option.
As the retired employee would now be self employed, you would have far less administration associated with them – you would no longer have to issue a wage slip to them, no longer have to deduct income tax or account to the income tax department each month, and no longer have to pay employers' social security contributions on their behalf.
Payment to them for their services would be per job or project that you have assigned to them. They would submit an invoice to you either for an agreed fixed sum or at agreed rates.
In the event that the health of the former employee then fails either suddenly or over a period, such that they are unable to continue to provide the services in accordance with the agreement, it would simply lapse. You would not owe them any sum other than in respect of work they have previously undertaken for you for which you have not yet been invoiced for.
A prudent employer will consider the situation on an employee by employee basis and prior to the relevant birthday of the employee, will seek some advice, so they are adequately prepared.
If age is subsequently added as an attribute after the proposed enabling law in Jersey on Discrimination takes effect, there will also be an impact for employers and no doubt, this will subsequently be the topic of further comment.
Any of our employment team can be contacted in respect of the above and if required, will assist in the drafting of a suitably worded retirement policy, fixed term contract or service agreement.
To view the Employment & Pensions News October 2013 click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.