Retirement age for employees is a complex topic for employers to navigate.
It is increasingly the norm for employees to want to work beyond retirement age due to financial concerns, the desire to remain productive, the increase in remote work possibilities and rising longevity.
On the other hand, employers often prefer the older employees to make room for younger employees.
In South Africa, we have three acts that are relevant to retirement. These are the Basic Conditions of Employment Act (“the BCEA”), the Labour Relations Act (“the LRA”) and the Employment Equity Act (“the EEA”).
None of these acts prescribes a normal or a default retirement age. This, in principle, leaves the employer to determine the appropriate retirement age for their employees. But how do they decide? Should it be 55, 60, or 65?
Section 187(1)(f) of the LRA determines that terminating an employee based on age is considered automatically unfair. This means that age-related dismissals could involve compensation of 24 months’ remuneration instead of the usual 12.
In section 6, the EEA determines that dismissing an employee based on age could constitute unfair discrimination unless the employer can prove that age is an inherent requirement for the role—an often challenging task.
Section 187(2)(b) of the LRA states that a dismissal based on age is fair if it aligns with the “normal” or agreed-upon retirement age for persons in that capacity.
Determining the normal retirement age for a specific industry can be difficult. Where an employer’s employees have been retiring at a specific age over an extended period, that age can generally be accepted as “normal” for that business. Employers who belong to or fall under the scope of a bargaining council must consult their Bargaining Council’s main agreement to see whether the council set a normal retirement age for its industry. Retirement fund rules can also be used as a good guideline. Without clear guidelines on what is accepted as “normal”, any age the employer selects unilaterally will remain open to dispute.
Where employers rely on the “normal” retirement age they often confirm that age in a company policy document.
The safest option for employers remains to focus on the ‘agreed upon’ retirement age by adding a retirement age clause to the employment contract. This agreement establishes the retirement age as a mutually agreed-upon condition of employment.
In conclusion, while the law empowers employers to set retirement ages, the process demands thorough consideration, compliance with legal statutes, and a subtle approach to avoid potential legal entanglements. Striking a balance between organisational needs and employee rights remains a pivotal challenge in the dynamic realm of employee retirement.
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