Age Discrimination - Discouraging Loyalty? - Expert Comments

David Reid
1st Sep 2005

Many employers offer their employees benefits to reward loyalty. Common examples include giving employees additional holidays, or private healthcare, on the completion of a number of years of service.

But employers should be aware that the draft regulations currently released contain a general exemption, and two specific exemptions, which will allow employers to continue offering service related benefits to their employees in certain circumstances once the legislation comes into force.

 

General exemption

 

Where it appears to an employer that offering a benefit to their employees would be advantageous for the company, the employer will be allowed to continue providing that benefit.

 

A benefit will be deemed to be advantageous to the company where the existence of such a benefit would reward the loyalty of staff, encourage the motivation of staff, or recognise the experience of staff.

 

For this exemption to operate employers will need to award the benefit concerned to all staff who have the required length of service, and who undertake either work of a broadly similar nature, or work of an equal value.

 

Accordingly, for example, if an employer gives its employees two additional days annual leave on the completion of 10 years service, this could potentially fall within the general exemption. An employer could argue in such a case that providing two extra day's holiday would serve to reward the loyalty of their staff. As long as the employer granted this benefit to all employees undertaking similar positions, with the requisite level of service, it is thought that the employer's actions would not be discriminatory.

 

Specific exemptions

 

The regulations also contain two specific exemptions:

  1. If a benefit is awarded to employees, but requires less than five years service, the provision of such a benefit will not be age discriminatory. In order to benefit from this exemption, employers must award the benefit concerned to all staff who have the required length of service, and who undertake either work of a broadly similar nature, or work of an equal value. Therefore if an employer offers private health insurance to employees on the completion of two years service, this would fall within the exemption, as long as the insurance was offered to all employees who had attained that level of service, and who hold similar positions within the company.
  2. Where an employer is obliged under statute to provide a benefit to employees, the provision of such a benefit will not be age discriminatory. An example of such a benefit could be a redundancy payment, which is calculated with reference to an employee’s length of service.

Although the regulations are still in draft form, and are not expected to come into force until October next year, employers should be examining the changes that may need to be made to the benefits they offer their employees now, in order to ensure that compliance with the legislation is achieved.

 

Following the introduction of the regulations employers will need to ensure that any benefits which require a minimum length of service are permitted by one of the exemptions, in order to ensure they are not discriminating against their employees on the grounds of age.

 

Start review your benefit structure now. Do you provide service related benefits to staff? If so can these be justified under one of the exemptions?

 

If you believe that benefits could fall within one of the exemptions and therefore be justified, do you apply those benefits to all employees holding similar positions, with the required level of service?

 

If you are in any doubt about the benefits you offer seek legal advice now, so that any necessary changes within your organisation can be implemented well before the legislation comes into force next year.

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