He runs Britain’s biggest company. But when Lord Browne of Madingley, Chief Executive of the oil giant BP, reaches 60 in February 2008 the board wants him to go. In a last minute compromise they have now settled on 31 December 2008 as his departure date. But the BP boss will still be nearly two months short of 61 when his company pensions him off.
If Browne had stood his ground he could have stayed on as chief executive – with his £6 million a year pay package – until 20 February 2013. Because from the start of this month every one of us in work – however much or little we earn – has the right to stay on until we are at least 65. Earlier retirement ages will become illegal when powerful new laws against age discrimination come into force on October 1st.
And your boss cannot just tuck your P45 into your 65th birthday card. The new law lays down strict procedures that have to be followed. First, the company must have a clear policy that everyone retires at a set age – that can be 65 or more but it cannot be less. Second, as you approach the retirement age your employer must give you at least six months notice in writing that you will be expected to leave on that date. Third, you then have the right to ask if you can carry on working – either full time or part-time. Your employer must tell you of this right and you must exercise it at least three months before the retirement date. The employer must then consider that request and give a response as soon as they can. You can then appeal, internally, against that decision. Only when all that has happened can your boss make you retire. The time limits are different for the first six months of the new law.
The weakness of the procedure is that the employer can simply say at each stage "It’s our policy. You have to go". But the employers’ organisation the CBI believes that is unlikely to happen. It lobbied hard for the right to have a fixed retirement age and its Deputy Director General John Cridland says experience with similar rights given to women returning to work after maternity shows employers will be flexible.
"In the case of women returning from maternity, 90% of requests that women have made for flexible working are met by the employer and only 10% are turned down. We came up with extending this idea for 65 year olds. We think we can achieve cultural change, encouraging employers to look openly at older workers’ talents by a more flexible approach which has worked for working women."
People who do work after 65 will now have full employment rights. In the past someone aged 65 or more could not claim unfair dismissal and was normally excluded from redundancy pay. But now employers who want to dismiss someone over 65 will have to take care to do it fairly. Older people can of course be dismissed for the normal reasons, such as incompetence or dishonesty. And they can be made redundant; but no-one can be picked for redundancy on grounds of age. If someone over 65 is made redundant then they are entitled to a redundancy payment. This is a big change. Before October 1st they got nothing – and a reduced amount if they were made redundant at 64. Those rules are now scrapped. The minimum redundancy payment is set down by the Government. It is 1½ week’s pay for each year’s work aged 41 or more for the employer and one week’s pay for each year’s work aged 22 to 40. A lower rate applies at younger ages. The amount of the payment is restricted by two limits. First, no more than 20 year’s work can be counted. Second, pay is only counted up to a maximum of £290 a week. So the maximum redundancy pay is 20 x 1½ x £290 = £8700.
The Government has decided that these age bands for redundancy pay do not break the anti-discrimination rules – even though they discriminate on grounds of age! Employers who pay more than the statutory minimum will be able to use age bands for their scheme as long as they are identical to the official ones. So they could for example give twice the statutory amount or replace a week’s pay with a month’s.
Company pension schemes will be largely exempt from the age discrimination rules. So they will be able to set age limits for joining a scheme, will be able to have different pensions for existing staff and new staff, vary contributions by age, and set an age at which contributions to the scheme must stop and at which the pension may be drawn. So although an individual may work until they are 75 the last ten years may not count towards their pension. In some cases people will be able to draw a full pension and carry on working full time for the same company.
The new law forbids age discrimination in training. So all colleges and universities will have to admit people regardless of their age. However if you do a degree course you will not get a student loan for your living costs unless you are under 60. Again the Government insists that this age bar is fully in accordance with the new law. Strangely, you can get a loan to pay your tuition fees (up to £3000 a year) at any age and nor are older people barred from the various grants that are now available. If your employer offers training then it must be made available to staff regardless of age. However, if someone is so close to the company’s retirement age that they would not have a reasonable time after the training to make use of it then they can be excluded.
Pay scales based on age are also generally prohibited. However, employers will be able to pay more to long-serving staff who have been with the company for at least five years if they can show there are good reasons for doing so. For example, if experience makes staff work more quickly and efficiently or if it helps retain staff who might otherwise look for another job. Similarly, promotion must be ‘age blind’ – it cannot be withheld or offered just on grounds of age nor can it be used as a factor when deciding which person to promote.
Employers will have to take care not to take account of age when they recruit staff. Application forms should not ask age and words like ‘mature’ and ‘young’ should disappear from job adverts. However, it is not clear if terms like ‘experienced’ or ‘enthusiastic’ which could imply age or youth will be allowed.
There is one big loophole in the new law. An employer can discriminate on grounds of age if such discrimination can be ‘objectively justified’. For example a company that wanted to fix a retirement age of 55 for a particular job would have to show that to do the task required certain physical or mental abilities which people over that age do not have. Because people age at different rates it will be hard to prove that such justification exists. But ‘objective justification’ is likely to be the big battleground between employers who want to discriminate on grounds of age and their staff who object.
Anyone who thinks they have been discriminated against on grounds of age can go to an Employment Tribunal. It can order the employer to pay compensation and to reinstate someone who has been unlawfully dismissed. You should always get advice before complaining to the tribunal.
All discrimination legislation has been tested, clarified and often extended through tribunals and the court system. Even as age discrimination laws begin the Government is threatened with a legal challenge to the rule which allows companies to fix a retirement age of 65 or more. In America people can choose to work on until any age as long as they are physically and mentally fit to do so and the Government has promised to look at this rule again in 2011. With state pension age rising to 66 in 2024 and eventually to 68 by 2044 this exception seems unlikely to survive.
Further information
Government age discrimination website
www.dti.gov.uk/employment/discrimination/age-discrimination/index.html
How to appeal
www.employmenttribunals.gov.uk
Official anti-discrimination information
www.agepositive.gov.uk
October 2006