How should you manage employees who are approaching retirement age?

This is an issue that many employers face – and you need to be very careful about the actions you take.

Compulsory retirement is illegal in all Australian States and Territories.

Compulsory retirement is when an employer:

• retires an employee;
• persuades an employee to retire; or
• treats an employee in such a way that they are ultimately forced to retire.

Therefore, you must not sack workers because they are ‘too old’, nor can you ask workers to sign an agreement that they will retire upon reaching a certain age.

Under the Fair Work Act 2009 (FW Act), a forced retirement would constitute unfair dismissal if the employee’s age was the only or predominant reason for the employee being forced to retire. It would also constitute discrimination under federal and state anti-discrimination laws (unless you can prove that he or she can no longer perform the inherent requirements of their position).

The FW Act also prohibits an employer taking “adverse action” against an employee, which includes refusing to employ someone, injuring them in their employment or altering their position to their prejudice, on the basis of age. In other words, you cannot force an employee to retire at a certain age.

So how can you manage employees who are approaching retirement age?

In the event that you believe an employee, having reached a certain age, is no longer able to perform the duties or requirements of his or her position, you will need to manage the performance of the employee in the usual and lawful way that you would with an employee of any age. A formal performance review system is the best way to handle the situation provided it is applied to all employees on a regular and objective basis.

Remember, you cannot merely state that the employee is unable to perform their duties because they have reached a certain age.

You may also wish to consider implementing a retirement policy. The policy may offer retirement benefits to employees who are approaching an age where succession is a commercial need. Of course, retirement policies require careful drafting so as not to offend the unfair dismissal and discrimination provisions outlined above.