Why are retirement policies important?
There is no statutory retirement age fixed by law in Ireland. Many employers, therefore, choose to specify a company retirement age in the employment contract. Dealing with retirement has been complicated in recent times by the announcement that the state pension age will increase to 67 in 2021 and 68 by 2028. If the contractual retirement age is lower than the state pension age, employees who intend to rely on the state pension as part of their financial planning may face a shortfall in retirement.
Some employees, on the other hand, may wish to retire early while certain employers may have provided that the retirement age is whatever date the employee becomes entitled to receive the state pension. As working lives are growing longer, mandatory retirement policies are coming under more and more scrutiny from concerned employees.
A retirement policy clarifies procedures
The absence of clear laws on retirement means that it is important to have a retirement policy in place that works for your business and your employees. A retirement policy will set out a procedure that employees can follow when approaching retirement age. Making employees aware of the steps to follow in the lead up to retirement is a key component of a retirement policy.
A retirement policy clarifies timeframes
Your organisation should write to employees who are nearing retirement approximately 12 months in advance to discuss the practicalities of retirement. A retirement policy should outline the timeframe in which employees can expect to receive written confirmation of their retirement. The confirmation should set out that a clear understanding of the date of retirement has been agreed. For your own operational reasons, clarifying the retirement timeframe with the employee allows you to begin making preparations to fill the role.
A retirement policy clarifies working beyond retirement age
An employee may wish to remain working beyond your stated retirement age. Employers typically request that employees make such a request in writing and reserve the right to deny the request for business or other reasons. If an employer refuses an employee request to continue working beyond retirement age, it must have objective justification for refusing the request.
Without objective justification for retirement age, it will be discriminatory to force an employee to retire at a certain age under employment equality legislation. If employees are required to continue in employment beyond retirement age for the purposes of overseeing a handover process, you should look at putting any such employees on a specified purpose contract.
Examples of objective justification
Certain industries or specified jobs may require employees to retire earlier than the state pension age. Firefighters and winchmen, for instance, must maintain a certain level of physical capability to perform their roles.
Pension contributions
If employers pay contributions to an employee’s pension fund, all the details should be outlined in the relevant pension policy documents. Employees will appreciate receiving clear advice in relation to how their finances will look after retirement.
Retirement risks on the rise
With a rising state pension age, employees are increasingly aware that mandatory retirement policies must be objectively justifiable to comply with employment equality legislation. To protect your organisation against the risk of a discrimination claim, it is vital to have written policies in place so that both employees and employers have a clear understanding of what happens when employees are approaching retirement age and why any specified mandatory retirement age is necessary.
Need help putting a retirement policy in place? Call 0818 923 923 to speak with an employment law expert today or if you would like one of our advisors to call you back, fill in your details here.
