Employment Update: Over the Hill? Compulsory Retirement in Ireland

17 November 2017

Longer working life

Life expectancies have risen to an average of 82 years of age. Despite this, most employers still have the traditional mandatory retirement age of 65 for their staff across the board. This can be set out in a written employment contract, a policy or by practice. As a result of improved standards in health, employees are increasingly looking to work beyond the age of 65 to put themselves and their families on a stronger financial footing when they retire.

This willingness to work will only intensify in the coming years. This is because the gap between retirement age and the age a worker is eligible to receive the state pension is increasing, to 67 in 2021 and 68 in 2028. As a result, compulsory retirement ages imposed by employers are, and will continue to be, a contentious issue for older staff.

Compulsory retirement in Ireland

There is no statutory retirement age in Ireland. Imposing a set retirement age on an employee raises the issue of age discrimination. Whilst it is allowed under employment equality legislation, it is not an unfettered right. Contractual retirement ages must be objectively justified by a legitimate aim and the requirement must be appropriate and necessary to achieve this aim. So, if employers cannot show that their policy is appropriate and necessary based on a legitimate objective, then the requirement will likely be considered discriminatory on age grounds. Employers will have to consider the company’s overall business needs and determine the retirement age based on those needs for each class of employees. Recent judgments have outlined a number of reasons which may be considered to objectively justify the mandatory retirement of employees:

  • Health and safety of staff
  • Career progression to retain staff
  • Increased opportunities in the labour market
  • Maintain an age balanced workforce
  • Succession planning

Managing compulsory retirement

If employers choose to have a compulsory retirement age for their staff, or sections of their staff, this requirement must be incorporated into the employment contract in some form. Recent cases have highlighted the importance of how this requirement is communicated to staff and how it is implemented in practice.

The High Court recently dealt with a claim that the requirement was implied in a doctor’s employment contract. The doctor had been an officer of the Health Service Executive (HSE). The HSE had a statutory retirement age of 65 for that category of employee. The doctor, however, was able to show that other doctors on the same contract had not retired at 65. The High Court sided with the doctor and found that the compulsory retirement age of 65 had not been implied into the contract. This case illustrates the importance of ensuring that the retirement age in place is implemented consistently and that any failure to enforce that age can undermine the policy. 

Pension considerations

Employers will also need to check their pension scheme documentation to see what the stipulated normal retirement age is. The employer may want to change this to align it with any change to a retirement age set down in their employment contracts. The pension scheme documentation will also state what options are available in terms of pension drawdown, should an employer wish to allow an employee to continue to work beyond their normal retirement age.

What’s next?

There has been growing support for putting an end to compulsory retirement in Ireland. The Citizens Assembly recently voted in favour of abolishing the practice. The Irish Government also supported, in principle, the Employment Equality (Abolition of Mandatory Retirement Age) Bill 2016 which seeks to formally prevent employers from imposing a compulsory retirement age on employees.

With the ever increasing cost of pensions to the State and the rising support for abolishing compulsory retirement, it may be sooner rather than later that we see some legislative intervention on the issue.

For now, employers should ensure the retirement age of employees is incorporated in contracts, or is widely communicated and that the aim of this can be objectively justified. 

For more information on how compulsory retirement can impact your business, contact a member of our Employment & Benefits team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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