Some people are quite happy to retire at the earliest possible opportunity. Others simply don’t want to let go. Yet everyone has to stop working at some time or other. But is there a generally accepted retirement age? And how is an employee’s services terminated when that person reaches retirement age? What rights does an employee have if he or she continues working beyond retirement age? These questions give rise to some interesting answers.

Employers might be alarmed to know that if someone is dismissed due to old age, it can be regarded as a so-called automatically unfair  dismissal. This would be the case if the dismissal were found to be discriminatory on the basis of the person’s age. It is conceivable that the employer may have to pay compensation of anything up to 24 months’ remuneration.

Agreed date of retirement
At the other extreme, there would be no claim for unfair dismissal if the services of the employee were terminated on the employee reaching the agreed or normal retirement age. There is no law that determines when a person must retire. Yet, if the retirement age is agreed on in terms of a contract of employment there can be no argument.

Employment may be terminated without prior procedures, and no notice pay or severance pay is payable. If a specific date for retirement has been agreed on (e.g. the last day of the month following the 60th birthday), no notice has to be given. If no date has been agreed on, but there is an agreed or normal retirement age, the employer simply has to notify the employee of a date that retirement will become effective. This needs to be done with due regard to the terms of the agreement regarding retirement and the notice of termination stipulated in the contract of employment.

Normal retirement age
The situation, in which employers most frequently find themselves, is where the contract of employment does not address retirement age. Then one has to consider what the “normal” retirement age is – 55, 60, 65 or something else? One aspect to consider is past practice, but that might  be inconsistent or employees might  be unaware of the practice. Another aspect is the rules of a company’s provident or pension fund. However, the Labour Court has on occasion found that one cannot necessarily rely on the fund’s rules as being indicative of normal retirement age.

Employers who wish to avoid unnecessary disputes with a employees who are not interested in retiring, should come to an agreement with their employees on when the employees will retire. Ideally, a retirement provision should be included in the contract of employment. Where there is no such provision, the employer can at any time seek an agreement with employees as to when they will retire. Such an agreement should preferably be in writing. Another option is to introduce a policy that indicates the normal retirement age. Such policy should only be introduced after proper consultation with employees.

Work beyond retirement
But what if the employee has worked beyond the agreed retirement age, as is often the case? Although  case law seems to indicate that such employees are not protected against unfair dismissal, it is unlikely that this issue has been finally laid to rest.

It would be advisable for employers to take measures to dispel any possible misunderstanding that might arise. It must be made clear what the terms of such extension would be. Examples of such terms are that the employee will continue to work until a specific date, or that employment will continue indefinitely after the retirement date, subject to either party giving the other an agreed period of notice as to when the “revised” retirement date will become effective.

To summarise:

• There is no legally binding or generally accepted retirement age.
• Employment may be terminated without notice or financial obligations when an employee reaches the agreed retirement age-
• If there is no agreement on the retirement age, employment may be terminated at the “normal” retirement age, but the employer would have to prove what the normal retirement age for the establishment or industry is and that it has been reached.
• Where a person is employed beyond the agreed or normal retirement age, it would be advisable to agree to the terms of the extended service in advance.

Author: Jan Truter of Labourwise.
Labourwise is an on-line labour relations service aimed at SMMEs to assist entrepreneurs to implement effective labour relations in small businesses. They can be contacted via www.labourwise.co.za or info@labourwise.co.za