Brainfood: Workplace Rights - Age and Redundancy

New laws prohibiting age discrimination in employment with effect from October will present challenges for business. One tricky issue is the regulations' impact on severance pay schemes. Companies have established a wide variety of such schemes over the years, providing employees with a degree of financial security on redundancy. The problem is that formulae for calculating payments are usually based on length of service - eg, a month's pay for each year of employment. As they discriminate on grounds of age, they are vulnerable to claims from younger, short-serving employees.

by
Last Updated: 31 Aug 2010

An exception in the regulations allows enhanced redundancy payments, but this is applicable only where employers replicate the age multiples used in calculating statutory redundancy pay (which the Government is controversially retaining). Most company schemes don't use the state method, so the employer will have to fall back on the general defence under the regulations of showing that the discriminatory impact is 'justified'. Although tribunals may be sympathetic, this will represent a significant financial exposure for many businesses. And as enhanced severance pay is likely to form part of employees' contractual rights, the alternative option of removing schemes altogether is equally unpalatable.

Michael Burd and James Davies, Lewis Silkin solicitors, e-mail: employment@lewissilkin.com

Find this article useful?

Get more great articles like this in your inbox every lunchtime