Dealing with requests to work beyond the contractual retirement age
There is no fixed national retirement age for employees in Ireland. Although there is a statutory retirement age established by law for public service positions, in general, employers use the employment contract to set out the mandatory company retirement age although it may also be implied through custom and practice by reference to the retirement age or normal retirement age in the employee handbook or occupational pension scheme.
With the introduction of the Equality (Miscellaneous Provisions) Act, 2015, it is now only permitted for employers to fix a mandatory age of retirement if:
a. it is objectively and reasonably justified by a legitimate aim, and
b. the means of achieving that aim are appropriate and necessary.
To date, the most common retirement age mandated in contracts of employment has been 65. However, this is causing concern among employees as the state pension age has increased to 66 and with the recent announcement of the reforms to the State Pension system in Ireland, people will have the option to continue working up until the age of 70 in return for a higher pension.
When dealing with requests to work beyond the ‘usual’ retirement age, employers should revisit The Code of Practice on Longer Working (SI 600 of 2017) which outlines the best practices to follow during the engagement between employers and employees in the run up to retirement, including responding to requests to work beyond the retirement age.
The Code states that within 6 to 12 months of an employee’s retirement date an employer should remind the employee of the requirement that they retire on the contractual retirement date. This notice should be followed by a meeting to discuss the imminent retirement date and any possible issues that may arise, while also addressing measures (subject to agreement and where appropriate) which would support the pathway to retirement. These may include flexible working arrangements, pre-retirement courses and/or alterative duties approaching the date of retirement. Care should be taken to ensure that any transitional measures or changes to the existing contract of employment are agreed with the employee rather than unilaterally imposed. The Code further recommends that the employee is provided with guidance and information on matters associated with retirement, whether a pension scheme is in place or not.
In addition to the above, employers must note the recent announcement by Minister for Social Protection Heather Humphreys whereby she revealed a series of landmark reforms to the State Pension system in Ireland. The measures, which were approved by Cabinet, are in response to the recommendations from Pensions Commission.
The set of reforms agreed include:
- Maintaining the State pension age at 66 and introducing a new flexible pension age model.
- From January 2024, people will have the option to continue working up until the age of 70 in return for a higher pension which is proposed to be 24% higher at 70 years than it would be if taken at 66 years.
- Over the next ten years, as recommended by the Commission on Pensions, there will be a move to a Total Contributions Approach, ensuring that people's pension rates are based on the number of years they have worked and paid contributions.
- Enhanced State pension provision for long-term carers to be introduced from January 2024. This will mean, that people who have to give up work over a long duration to care for someone will have their time spent caring recognised in the pension system.
- The plan includes a commitment to explore a scheme to provide a benefit payment for people who, following a long working life of 40 or more years, are "not in a position to remain working in their early 60s". This would be those that work in highly physical occupations like construction. This will be modelled on the current benefit payment for 65-year-olds who are not yet entitled to a payment under the State pension system.
In relation to an employer’s right to fix retirement ages, as per the Minister's press release, the Government proposes to introduce measures where employers will not be permitted to fix retirement ages below the State Pension age which is 66. We await further details in this regard.
The SFA will continue to keep members updated on this matter. You can contact our HR Executive Fiona Mulligan on fiona.mulligan@sfa or ring 01 6051557 if you have any questions on the above.