Can Retirement be Enforced?
Published in Labour Law · 5 July 2022
Retirement, the end of an individual’s active working life, is a relatively new concept in the history of mankind. Before modern medicine, the average life expectancy was low, and most people generally worked until the end of their lives. Improved healthcare has gradually changed this, and now the average life expectancy continues to increase around the world. Retirement is now a crucial aspect of the employment relationship but is often overlooked to the detriment of business owners. In this article we will look at what the labour law says about retirement and what we can do to avoid any unnecessary costs when terminating an employment contract based on retirement age.
The Labour Relations Act 66 of 1995 (LRA) says that a dismissal based on grounds such as race, sex, gender, religion and age will be discriminatory and thus unfair. The LRA, however, also mentions that retiring an employee at the “normal” or “agreed upon” retirement age is acceptable. The law allows for retirement but has attached certain requirements to ensure that the process is fair. The employer should either prove that the retirement age and process is “normal” practise within the company, or they can sign an agreement. The easiest and most acceptable method is to sign a retirement agreement which is usually included in the employment contract or a retirement policy.
Many people assume that 60 or 65 is the “normal” retirement age in South Africa because of the eligibility to receive pension. This assumption would be incorrect as the LRA does not define any specific age as the “normal” retirement age and leaves this open for the employer and employee to specify in the employment contract or company policy. Be aware that the termination of an employee based on old age in the absence of a retirement agreement may lead to charges of unfair discrimination and potentially large costs at the CCMA. The necessity of having a retirement policy is clear but what should this clause or policy contain in order to protect an employer and cover all the various possibilities without being unfair?
An example would be an employer who is so caught up in business operations that he/she allows the retirement age of an employee to pass by and simply forgets to retire the employee. If the employer remembers to retire the employee one year later, is it still valid or have they waived their rights? This mistake may have created expectations in the employee of extended employment. A sudden termination after the retirement age has passed may not be seen in a favourable light at the CCMA. Another example is an employer who may want to retain an employee for a few months or years after the normal retirement age while maintaining the right to terminate the contract legally “at will”. These situations should be covered in the retirement policy and built into the employment contract.
The retirement policy should specify the normal retirement age when an employee is obligated to retire, it will cover the various scenarios beyond the normal retirement age and the procedures to be followed prior to retiring. This should also clarify what payments will be made to employees.
Retirement should be a pleasant and dignified process for all those involved. A retirement policy that is clear, comprehensive and agreed upon at the commencement of employment is the best way to allow the employer and employee to part ways in a respectful and professional manner.
This article does not constitute legal advice and is based on the author’s interpretation of legislation and case law. Book a consult for legal advice or assistance pertaining to your specific matter.