Pensions Commission must address Ireland's ageing workforce
Ibec, the group that represents Irish business, has said that Government and business must work together to address the fiscal sustainability implications of Ireland’s ageing workforce. In its submission to the Pensions Commission (see attached), Ibec said that such collaboration must be delivered without jeopardising the needs of business for certainty, talent attraction, retention, and succession planning.
Central to this is employers’ ability to fix mandatory retirement ages in contracts. In a survey of 300 Ibec members, CEOs and Senior HR Directors were asked if their organisation has a fixed retirement age. More than 80% (83%) confirmed that they do and that this remains an important tool for strategic workforce planning.
Ibec Director of Employer Relations, Maeve McElwee said: “Our survey shows that when asked what impact legislation abolishing an employer’s right to fix a retirement age would have on their business, 201 (67%) members indicated that it would have a negative effect on their business.
“Significantly, 216 (73%) of those surveyed also confirmed that they consider retaining staff beyond their fixed retirement age, with 184 of those surveyed using the option of a post-retirement fixed term contract.
“However, we know that the current legislative framework presents many difficulties for employers, in particular where an employer seeks to facilitate employee requests to work longer. The legislation undermines employer’s ability to rely on the objective justification underpinning their mandatory retirement age.
“Policies to extend working lives require a dual approach: they should reduce incentives to retire early, and reward longer careers (pension system related); and they should support companies to accommodate both enterprises’ and older workers’ needs for longer participation in the workforce.”
• Employers’ ability to fix mandatory retirement ages in contracts should be retained. The removal of this ability would be disproportionate and arbitrary. It would remove the legitimate autonomy of employers for workforce planning as reiterated in the Workplace Relations Code of Practice on Longer Working which states: ‘Good workforce planning is a critical element in any workplace. Central to this are appropriate employee numbers and skill sets, recruitment, and planning for departures including retirement.’
• Government should provide as much legal support (including legislative amendment) as is possible to recognise the alignment of contractual retirement ages with the State pension age as a legitimate employment policy and labour market aim and that the means used are appropriate and necessary, in line with Article 6 of the European Employment Equality Directive.
• The possibility of setting a Default Retirement Age (DRA) at the level of the State pension age should be explored (and framed in a way which complies with EU law). The DRA could be set by Government and could be the minimum age at which employers can (if they choose to) set a mandatory retirement age. Employers would be able to set a mandatory retirement age below the DRA only where this can be objectively justified by the particular occupation.
• Government should remove the necessity to objectively justify a post-retirement fixed term contract (not required under EU Directive) or confirm that bridging the gap to age of entitlement to state pension age is sufficient objective justification.
• Legislation and/or Codes of Practice should provide certainty to employers around the provision of different benefits for post-retirement fixed term contracts.