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Comment: The impact of age discrimination laws on service related awards

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How will new regulations outlawing age discrimination affect service related award schemes? Amanda Shaw, head of HR at Cottrills, comments on the Employment Equality (Age) Regulation 2006 draft paper.

Until now, there has been no legislation dealing with age discrimination in Great Britain. This will change in October 2006 when legislation will be introduced outlawing age discrimination in employment and vocational training.

The DTI have consulted on a number of occasions regarding the directive, and the final draft age regulations, called ‘The Employment Equality (Age) Regulations 2006’, were laid before parliament on 9 March 2006 due to come into full force on 1 October 2006.

As head of HR for Cottrills, the UK market leader in the supply and management of service recognition schemes, I have attempted to interpret the legislation’s progress to our customer base and also relate it to our own provision of benefits.

The final draft paper, issued last week, pleasantly surprised me with less onerous exemptions in relation to service related benefits; the tone of the legislation has definitely softened slightly from the more demanding restrictions indicated in the consultation paper (DTI July 2005).

Should organisations be concerned about the new laws?
From October 2006, employers will have to adopt age positive practices. This means you will no longer be able to recruit, train, promote or retire people on the basis of age unless it can be objectively justified and it will not take long for the consequences of not complying to take effect.

As an example, following the introduction of age discrimination in the Republic of Ireland in 1998, allegations of ageism now account for 19% of Ireland’s formal discrimination claims.

It is therefore important that you review your firm’s recruitment, selection, training, promotion, flexible working, pay and benefits, retention, redundancy and retirement procedures as soon as possible.

Will organisations be able to continue to reward staff for long-term service?
The answer in all probability is yes. The government has always indicated that the age discrimination legislation will permit certain employment practices which reward loyalty or long service and the final draft age regulations contain provisions intended to honour this commitment.

Alison Loveday, head of employment at Berg Legal, legal advisors to Cottrills, explains, “The draft legislation states that where you offer a reward for a period of service that is no more than five years, then such a scheme will be automatically acceptable, as long as the rule is applied to all staff equally.”

The age regulations will contain a general provision and two specific exemptions on employment benefits relating to service related pay and benefits:

General provision:

This will be a provision covering length of service longer than five years. To rely on this exemption the employer must:

  • Award the benefit to reward loyalty, or encourage motivation, or to recognise the experience of its employee.
  • Conclude that there will be a business benefit resulting from the higher level of experience of staff, or from rewarding staff loyalty, or increasing or maintaining staff motivation.
  • Apply the length of service criterion similarly to staff in similar situations.

Specific exemptions:

  • Any length of service requirement of five years or less (counting both continuous and non-continuous service) will be exempted and will be able to continue (the “five-year-exemption”).
  • Length of service requirements that mirror a similar requirement in a statutory benefit are exempted and will be able to continue. This will ensure that employers can continue to make enhanced provision for employees – for example, contractual redundancy schemes where service-related provision is more generous under the statutory scheme.

Loveday continues, “If you operate a scheme that takes more than five years service into account, this will be permitted as long as the rule is applied to all staff equally and you can reasonably demonstrate that there is an advantage to the company in 'rewarding loyalty, maintaining motivation or recognising the experience of longer serving members of staff’.”

As a market leader in the provision of service award schemes, Cottrills believe that long service awards enhance an employee’s total reward package and are effective in aiding motivation, increasing staff retention and rewarding loyalty.

What practical steps can you take to address this issue?

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