How to manage retirement in your organisation

Some of us are looking forward to it more than others but it is a situation that is going to impact every employee at some stage so what are the best steps to manage it?

Contractual Retirement ages tends to reflect the age at which the state pension is provided, and it is this fact that highlights the importance of constantly revising existing policies given that the age that the state pension is provided at is increasing under the National Pension Framework.

In 2014 it increased from 65 to 66 and in 2021 it is due to increase to 67 with another increase to 68 in 2028.

For employers the risk around applying retirement ages relates to the question of discrimination – does an employee suddenly become obsolete the day after their 65th Birthday? Obviously not, but in some organisations, there is a need to manage the workforce as the company sees fit.

In 2017, the Code of Practice on Longer Working was introduced to inform employers about best practice for managing the period of employment around Retirement age.

The guidelines outline the objective reasons for issuing Fixed Term Contracts of Employment after enforcing contractual retirement ages in a non-discriminatory and fair way. Employers refusing Fixed Term Contract to employees after their Retirement age run the risk of discriminating against their older team members if they do not have a justifiable reason for doing so as per Code of Practice. So, what steps are employers required to take?

The first step is to ensure that the company has a policy in place with regards to Retirement that clearly outlines the company’s position. For the sake of transparency this should also be communicated in the contract of employment.

Where retirement ages are not outlined in contracts of employment it gives rise to the problem of trying to enforce a non-existent agreement that breaches the contract of employment and potentially results in an Unfair Dismissal. If there is no contract clause the company needs to establish a suitable policy and ensure that it is communicated to all employees with a signed receipt of acceptance. Where the policy is addressing a contractual shortfall, the onus is on the employer to highlight this to the employee.

Once employers have decided to apply a specific Retirement age the decision to do so must be made with “Objective Justification” – a clear reason that is objective within the needs of the business. The Code suggest the following as grounds as being objective: 

• Intergenerational fairness (allowing younger workers to progress);
• Motivation and dynamism through the increased prospect of promotion;
• Health and Safety (generally in more safety critical occupations);
• Creation of a balanced age structure in the workforce;
• Personal and professional dignity (avoiding capability issues with older employees); or
• Succession planning.

Any decisions around enforcing retirement or providing a Fixed Term Contract beyond the fixed Retirement age should take these guidelines into account. Failing to do so could result in a complaint being lodged under the Employment Equality act.

ISME have a new retirement policy template available to members that offers core guidelines on applying retirement. If you are planning for retirement amongst your team, please contact the HR team to discuss the best way forward.

It is important to note that there is another operational risk associated to retirement that can be far more damaging to the business than complaints for non-compliant procedures and these are the loss of key skills and knowledge as well as the impact that having long established team members leave can have on the company’s culture.

To help with the transfer of knowledge from the retiree to their replacement the management need to consider facilitating a robust handover and knowledge sharing process in advance of the retirement. If the retiring employee’s replacement has already been identified, it may be worthwhile having them both operate in the role for several months prior to the retirement date.

Once the replacement has found their feet the company could propose reducing the retiree’s hours on a phased basis (in agreement) until the final day of employment. This allows for a smooth transition period as well as ramping down period for the retiree that will allow for some of the shock that is experienced at the conclusion of their career to be reduced.

Retirement is a major change for people, and they can experience a range of emotions such as a sense of loss or lack of purpose, so it is important that employers consider their needs and treat is as an opportunity to help their employee develop a new phase of their life.

Simple steps such as providing pre-retirement training and support in the form of meetings with financial advisors to discuss financial management, identifying sources of guidance on health and well-being, giving guidance on Social welfare payments and identifying local activity groups that may be of interest are invaluable and will not only help the employee but will be looked upon favourably by other members of the team who may be nearing that phase of their careers and considering how they will be treated when their own time comes.

These suggestions are secondary and the core focus for every employer needs to be in ensuring a fair process is applied in the first instance, however it would go a long way in showing the value that the organisation places on its people up to their very last day in employment.