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Employers respond to Age legislation consultation 17 October 2003 EMPLOYERS RESPOND TO AGE LEGISLATION CONSULTATION AND CALL ON THE GOVERNMENT TO ADDRESS THEIR FEARS With the Government’s consultation on new age legislation due to end on Monday 20 October, the Employers Forum on Age (EFA) is speaking out about its concerns over the proposals in the Age Matters consultation document. The EFA’s overall belief is that the structure of future age laws is flawed. Ms Sam Mercer, Director of the Employers Forum on Age (EFA), says: ‘A lack of joined-up thinking from the Government has left too many grey areas in the current proposals. We are calling on the Government to address these to ensure that possible unintended consequences – such as the closure of occupational pensions schemes and the scrapping of employee benefits packages – are avoided.’ The EFA is urging the Government not to leave difficult decisions to the courts, but instead to tackle the following areas now: The risk to UK occupational pensions schemes With many occupational pension schemes structured around age-related criteria that could fall foul of the current proposals, companies could face discrimination claims from employees once the new laws are in force – and may seek to protect themselves from risk by shutting schemes. Pensions are the number one issue for EFA members: over 90 per cent have cited it as an area for concern. Sam Mercer says: ‘The consultation proposals suggest that the government has not clearly understood the implications of age legislation on occupational pensions. To remove all elements of potential age discrimination from pension schemes would not only present a huge administrative burden but would prove extremely expensive, making many occupational pensions unsustainable and leading to possible closure. ‘The consequences of not protecting such pension schemes could be far reaching. For example, employers might be forced to close their surviving direct benefit schemes altogether rather than face the risk of unlimited compensation claims. We want the Government to exempt pensions from the legislation.’ The end of mandatory retirement ages Employers believe that the new laws will mark the end of mandatory retirement ages and do not view a default age as a viable option in the long-term. Three-quarters (75 per cent) of EFA members are worried about retirement and only 4 per cent now plan to develop a policy based on a fixed retirement age. Sam Mercer comments: ‘Performance management is the obvious answer to managing without a retirement age, but even the most sophisticated companies with the best trained line managers will find this a challenge. ‘Employers have legitimate fears over the difficulty of performance management and the potential development of a ‘pay off’ culture. There is concern that the Government is transferring the risk and responsibility of an ageing workforce onto employers.’ The challenge to employee benefit packages The EFA is urging the Government to make length of service as a way of calculating benefits exempt from legislation to protect existing employee benefit packages. Many employment policies contain some length of service elements including incremental pay, additional leave, service related bonus payments, sickness benefits, celebration of ‘x’ years service, etc. Under the current proposals this could be classed as indirect discrimination. Over 70 per cent of EFA employers are not confident these benefits could be maintained under the current proposals. Sam Mercer says: ‘If employers are forced to demonstrate that each individual policy is both “appropriate and necessary” and each policy can be challenged, they may simply remove the benefit because they cannot afford to level up benefits for all. ‘Unless the Government takes action to protect length of service criteria, many benefits currently enjoyed by employees could be under threat.’ Timing is crucial The EFA estimates that employers could be exposed to litigation costs of up to £193 million in the first year of the legislation alone, so it is crucial that UK Business is given adequate time to prepare before the laws come into effect in 2006. The EFA believes that even the two-year window proposed is actually a very short period to implement the extensive changes to policy and practice that employers will have to make. Age Task Force Sam Mercer says: ‘With any single equality body unlikely before 2006 we urge Government to establish an age task force. Employers will have draft regulations in 2004, so in the two-year window before age laws come into force they will need advice and support. This should not be tackled in an ad hoc, uncoordinated way.’ back to the archive |
