The statistics are stark - by the end of this year it is anticipated that 36% of the British workforce will be aged 45 or over. By 2010, the figure will be 40% (DfEE report 1999). How well do these facts fit the image that you have of your company today and in five years' time? Will old, seasoned faces really outnumber the young to so great an extent?
The Government seems to think so - and for this reason, it is taking steps to implement the European Framework Directive on Equal Treatment, which seeks to eliminate (among other things) discrimination on the grounds of age. The age discrimination legislation which will be introduced in the UK in October 2006 is expected to be one of the most complex pieces of employment law in existence, and it is also likely to have a fundamental impact on the operation of businesses in the UK.
What is the current position?
When signing up to the European Framework Directive in 2000, the UK Government agreed an implementation period of six years, to give it time to prepare the legislation and to consult with business, individuals and expert groups.
During 2003, the DTI undertook a consultation exercise entitled Equality and Diversity: Age Matters. A copy of the consultation paper and a summary of the responses can be found on the DTI website ( The Government's own response to the consultation exercise has not yet been published. It is expected later this year, together with the draft legislation (in the form of regulations), which will also be put out for consultation.
The shape of the regulations
To ensure full compliance, the regulations will need to reflect the Directive.
And the directive itself is wide-ranging. It sets down a general framework for combating discrimination on the grounds of age, making it unlawful for an employer to discriminate either directly or indirectly against an individual on such grounds, in any matter related to their employment or occupation.
It covers individual terms and conditions of employment, working conditions and pay, and applies to both public and private sector employers. Discrimination on the grounds of both old age and youth is covered. This differs from similar legislation elsewhere, such as that in the USA, where only the over 40s are protected.
Specific exceptions are permitted in respect of direct age discrimination where they can be objectively justified by reference to one of the specific aims set down in the legislation, and the means used to achieve that aim are both appropriate and necessary.
Indirect discrimination is also permitted, provided it can be objectively justified (in the same way as in other discrimination legislation).
Implementing the Directive
The Government has expressed the intention of making the age discrimination legislation match existing discrimination law as closely as possible.
This means that, in the UK, there will be concepts of direct and indirect discrimination, victimisation, harassment, genuine occupational requirements, positive action and discrimination after employment. It also means that compensation for successful claims will be unlimited.
Under the UK legislation direct discrimination will be justifiable provided:
- it is justified by reference to specific aims
- it is appropriate and necessary in the particular circumstances
- the employer can produce supporting evidence.
The 'specific aims' are:
- health, welfare and safety
- employment planning
- training requirements
- encouraging and rewarding loyalty
- the need for a reasonable period of employment before retirement.
As with existing forms of discrimination, justification can be a difficult issue for employers to deal with, since much will depend on the circumstances facing the business at the time. Ultimately, cases will be tested before the employment tribunals, and in due course, guidance as to what is and is not likely to be objectively justifiable will be given. This is however, of little comfort to employers in the run-up to October 2006, and decisions about employment practices will have to be taken with one eye on the possibility that they may yet be subject to scrutiny by a tribunal.
What about retirement ages?
After reviewing the responses to the consultation exercise, the Government has already decided how retirement ages will be treated. In December 2004 it announced that the regulations should:
- set a default retirement age of 65, but also create a right for employees to request to work beyond the compulsory limit. Employers will have a duty to consider such requests (along the lines of the flexible working legislation);
- ensure close monitoring of the retirement age provisions, so that a formal review of the default retiring age can be conducted after five years
- allow employers the opportunity to impose earlier retirement ages where these can be objectively justified as being appropriate and necessary.
What about unfair dismissal?
At present, employees who are over the state retirement age, or the normal retirement age for their job, cannot bring claims for unfair dismissal (or for statutory redundancy payments). It is not yet clear how the Government will deal with unfair dismissal, but it seems likely that the age bar will be removed, and that existing unfair dismissal legislation will be amended to make compulsory retirement at the default retirement age (or the justifiable retirement age, if earlier) a potentially fair ground for dismissal.
The basic award for unfair dismissal (and consequently, statutory redundancy payments) is also likely to be reviewed, with the age-related element (which applies to employees of 41 and over) removed. It is currently proposed that the award will be a flat rate payment of one week's pay per year of service, up to a maximum of 20 years.
What should your business do?
As with all forms of new legislation, forewarned is forearmed. Although the exact format of the regulations is not yet clear, and although they will not come into effect for another 18 months, employers should start looking at existing practices, policies and procedures. Many employers may already be doing this - for those who are not, this is an early wake up call to get your house in order.
RECRUITMENT
One in four people aged 50-69 have experienced age discrimination when working or looking for work. Recruitment is likely therefore to be one of the key areas where the legislation will be tested first by disappointed job applicants.
Are your recruitment policies age-compliant? Bear in mind the following points:
- Avoid stipulating age limits or age ranges for potential candidates, and drop any references to 'young', 'mature', or 'according to age'.
- Ask for relevant experience, skills and ability rather than for particular qualifications - for example, ask for 'GCSE or equivalent'.
- Consider what experience is required - look for quality rather than length. Be wary of requiring, for example, 10 years' experience.
- Make clear to external recruiters that you expect them not to discriminate when putting forward candidates.
- Look at where you are advertising positions - will they be seen by a wide cross section of people?
- Consider whether you really need to include a date of birth section on your application form.
- Consider the interview processes and the composition of the interview panel - is it balanced in terms of age?
- Make and keep notes from interviews, and score candidates against objective criteria.
- Review your existing equal opportunities policies to ensure that reference is made to age.
- Provide training for managers and other decision-makers who will be involved in recruitment, to ensure that they are aware of their obligations and of the potential risks of discrimination claims. Make sure that they know not to take age into account when assessing potential job applicants.
- Do not make assumptions about candidates - for example, in relation to their length of experience - without taking steps to investigate further.
- Do not automatically prefer graduates fresh from university to older graduates on the basis that they will stay longer with the business. Younger employees are statistically more likely to move between jobs - older employees may be more likely to repay your investment.
PROMOTION AND TRAINING
- Ensure that any decisions regarding promotion and training are taken on the basis of skills and merit alone, and not age.
- Review your promotion and training policies for references to age, and provide appropriate training for managers so that they are aware of their obligations.
SERVICE-RELATED PAY AND BENEFITS
Look at your pay and benefits structure - how much of what you offer to employees is related to age or length of service?
Service-related benefits (for example, incremental holiday entitlements, long service awards), will, on the face of it, be potentially discriminatory, since younger employees are unlikely to meet the requirements for such benefits. Can you justify them? Is length of service important for your business? Does rewarding it help you recruit and retain employees? It is not yet clear how the Government proposes to treat such benefits, and some businesses support the retention of service-based awards. It is worth thinking now, however, about possible alternatives.
COMPANY REDUNDANCY ARRANGEMENTS
You should take time to look at these too, and, in particular at:
- your selection processes - selecting for redundancy purely on the grounds of age, or LIFO (last in first out) will be potentially discriminatory under the new legislation. Ensure that selection is made on the basis of objective criteria
- your redundancy pay arrangements - are they linked to age?
RETIREMENT AND PENSION SCHEMES
- What is your company retirement age? Do you follow it in practice?
Do you have a retirement policy? What do you do when succession planning has failed and employees about to retire carry a wealth of corporate memory and experience in their heads? Do you persuade them to stay? If the qualifying age for unfair dismissal is dropped will you still be happy to do this?
How will you remove them once their usefulness has passed?
- Have you considered flexible working arrangements? - would a part-time arrangement suit older employees better, or could they retire and come back on a short-term consultancy basis, in order to pass on their knowledge?
Incidentally, such arrangements may well create promotion opportunities for younger employees, thereby ensuring that they do not jump ship for better prospects elsewhere.
- Will 65 be an appropriate retirement age for your business? If you need a younger retirement age - perhaps for example, in a stressful business environment, or one which seeks to incentivise younger employees with promises of promotion - how will you justify it?
- Look at your pension scheme arrangements - will they need to be amended in relation to retirement age? Again, it is not yet clear how pension schemes will be affected by the new legislation, and specific pensions advice should be sought with a view to early planning.
The new age
It is clear that the new legislation will have a substantial impact on UK businesses, and will challenge historically accepted ways of working.
Taking the time to consider what must be done to meet the needs of the legislation will help to soften the blow. The Government's view is that employers can only gain from the adoption of non-ageist employment practices.
Given the existing and projected demographics of the workforce, employers may have little choice in any event.
Marian Bloodworth is senior associate, employment department, Lovells, Tel: 0207 296 2000.
