The world of work is constantly changing due to several factors shaping and influencing perceptions. These factors include employees increasingly enjoying a potentially longer productive work life due to better health care being available. The composition of the workforce also changes as new generations of employees enter the employment arena, resulting in less appetite for prescriptive employment benefits like medical aid schemes and compulsory retirement schemes. These benefits are considered best being awarded a cash value and left to the employee’s own election as to how to provide for it.
Eventually, these changes alter the general perception of employers regarding the tenure of employees’ productive work life. This then brings into the equation exactly what a retirement age nowadays is and how employers should deal with their employees’ work life expectation.
What guidance do we find in employment law regarding retirement age?
There is only one provision in employment law which addresses retirement age specifically, albeit by way of an exception to the concept of unfair discrimination. This provision we find in the Labour Relations Act (LRA) Section 187 and more pertinently in Sub-section 187(1)(f) read in conjunction with Subsection 187(2)(b) [Link to S187].
The reference to Section 5 (LRA) is merely a general protection of the rights an employee (or work seeker) enjoys in terms of the LRA within employment context.
Whereas unfair discrimination includes discrimination based on age (see Section 187(1)(f)), Sub-section 187(2)(b) explicitly categorises a termination of services due to the employee having reached the normal or agreed retirement age as fair.
For proper interpretation of the reference made in Section 187 of the LRA to retirement age, one needs to take notice of the clarity which certain pieces of case law provided
As pointed out in the LAC-case: Rubin Sportsware v SA Clothing & Textile Workers Union (2004) and, more specifically at passages 19 and 20 in the text [Link to passages 19 & 20] the reference to “normal” retirement age in Section 187(2)(b) is qualified by the addition: “…for persons employed in that capacity”. Employers may for instance prescribe different retirement ages for different categories or echelons of employees, hence this qualification.
As far as the distinction between “normal” retirement age and “agreed” retirement age is concerned, some clarity is provided by the LAC-case: Cash Paymaster Services (Pty) Ltd v Browne (2005).
At passage 26 in the text of this case [Link to passage 26] it is made clear that where there is an agreed retirement age within a workplace, that retirement age would take precedence over any “normal” retirement age. Normal retirement age is generally associated with the retirement age specified in the rules of a retirement fund, which would normally be binding on the members of the fund.
It has to be borne in mind that these funds are separate legal entities than that of the employer and the former governs the membership relationship. Any agreement which is reached between employer and employee regarding retirement age, governs the employment relationship specifically as far as the expected length of service is concerned.
In the LAC-case: SA Metal and Machinery Co (Pty) Ltd v Gamaroff (2009) it is pointed out at passages 19 and 28 in the text [Link to passages 19 & 28] , respectively, that the employee bears the responsibility to acquaint himself/herself with the rules of any retirement fund he/she belongs to and that the employer bears the responsibility to prove that there existed a normal or agreed retirement age within the company .
What then are the imperatives the employer must bear in mind when dealing with retirement age?
Where there is no retirement fund which employees are members of and where there is no provision in the employment contracts of employees pertaining to the retirement age, the “normal” retirement age can only be derived from the consistent practice within the company as far as retirement is concerned.
Where there is a retirement fund to which employees belong as members, the retirement age specified in the rules of such fund will constitute the “normal” retirement age and would apply in the absence of an agreed retirement age.
An employer may however provide for a retirement age in the contracts of employment, which will constitute an “agreed” retirement age, which supersedes any “normal” retirement age which may exist.
What employers must be cautious of is dealing with retirement of its employees in an inconsistent way. It is within the employer’s discretion to allow a specific employee to work beyond retirement age, especially when such a person possesses a scarce skill. Allowing this concession must however be based on justifiable criteria and not on mere compassion or favouritism.
There are different ways of dealing with employment beyond normal or agreed retirement age. One way may be to engage the employee by means of a fixed term contract of limited duration.
Another way may be to merely extend fulltime employment indefinitely beyond retirement age (which may exclude further membership to the retirement fund), which will imply that besides the employee resigning, any termination of employment by the employer has to adhere to the requirements of fairness associated with termination for misconduct, operational requirements, or incapacity.
Employees base their financial planning largely on the reasonable expectation of the tenure of their ability to remain gainfully employed. The more certainty is created between employer and employee in this regard, the more secure the employee and the employer will be in respect of the employment relationship.
Certainty can be created by simply relying on what a compulsory retirement fund stipulates regarding retirement age. Alternatively, the employer can create certainty by providing for a retirement age by agreement with its employees (normally by way of a provision in the contracts of employment).
It is also possible to dispose altogether with any stipulation regarding retirement age and allow employees to remain employed for as long as they are able to perform at an acceptable level and adhere to the rules of conduct.