# Regulatory Compliance Category > Labour Relations and Legislation Forum >  Retirement age

## manhav

I have been asked the following question this morning:

*"Can I be assisted on this matter, company policy states that the retirement age is 60 years with no extensions. Some years back employees were transferred to us (section 197 LRA) of which they still use their own pension fund which 65 years is the retirement age. The majority of employees are over 60 years of age and no longer productive. Any suggestions on how to retire them?"*

Section 197(2)(a) of the LRA reads as follows: _"If a business, trade or undertaking is transferred in the circumstances referred to in subsection (1)(a), unless otherwise agreed, all the rights and obligations between the old employer and each employee at the time of the transfer continue in force as if they were rights and obligations between the new employer and each employee and, anything done before the transfer by or in relation to the old employer will be considered to have been done by or in relation to the new employer."_

The employer in question is facing the following problem. 

Under the old regime (employer) the employees were used to the retirement age being 65. Should the new employer now decide to reduce the retirement age to 60 years of age, such variation of the employment contract will be regarded as a unilateral amendment of the employment contract.

The LRA allows employers to forcibly retire employees who have reached the "normal" retirement age, but fails to explain what constitutes normal retirement age.

Therefore, employers and employees need to look to case law for more detailed guidance and what would be fair in specific circumstances.

The employer's own rules and terms and conditions of employment can, within limits, play a significant role.

For example, in *Rubin Sportswear v Sactwu and others*, the employer took over a business and then introduced a rule changing the age at which employees were to take retirement.

The Labour Appeal Court found that the word "normal" means "the way things are normally done" and that the employer could not unilaterally change what was normal.

It is therefore imperative that employers have their rules reviewed in line with the latest interpretations of the courts.

In most circumstances, should any of these employees (60 years or older) then resign because they are not satisfied with such an amendment, the CCMA may find that the particular employees have been dismissed in terms of the provisions of Section 186. It will necessarily follow that such dismissal will be regarded as unfair, and the employer will end up re-instating these employees.

However, it is very difficult to say whether the new employer may find itself in the same detrimental position as described above. Firstly, it will depend on the terms and conditions of the existing employment contract. Then it will depend on the terms and conditions of the employment contract between the old employer and the relevant employees. An lastly, consideration will have to be given to the terms and conditions of the sales agreement between the old employer and the new employer.

Legal advice and assistance should be obtained to answer on the merits of each individual case..

It is advisable that the new employer commences a consultation process regarding early retirement and the official change of the retirement age. It allows the employer and the relevant employees to engage in a consultation process, which should in the end, be to the advantage of the employer. And yes, allow representatives of the relevant pension funds to address the relevant employees on the benefits of early retirement, if any. I will not even venture an opinion on this particular aspect, as I am not qualified and do not have the necessary knowledge on this topic.

Once the employees have accepted that they will benefit from early retirement, and they agree to accept early retirement, then the new employer may proceed to retire them.

Manie Havenga
Havenga & Viljoen Attorneys

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Dave A (11-Feb-10), sterne.law@gmail.com (12-Feb-10)

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## Dave A

> *The majority of employees are over 60 years of age and no longer productive.*


Damn shame, that.  :No: 

I'm struggling to wrap my head around how such a situation would arise in the first place.

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## manhav

The other issue is the attitude of the person who asked me the question. If you say that a person of 60 years of age or older are unproductive, then you may open another can of worms, and that is possible discrimination based on age.

I know people of 60 years and older, who are much more efficient and productive than the 25 year old who was appointed recently.

Admittedly, yes, when it gets to hard physical labour, it is very possible that the 60 year old is far less productive than the 25 year old. 

But that is not the point I wish to drive home or discuss.

The fact remains that the new employer, in the scenario I have sketched in the original post, has a problem. Now whether the new employer was aware of the ages of the employees of the old employer at the time of the transfer of the business, is unknown to me. Maybe the new employer saw an excellent business opportunity, grabbed it and signed the sales agreement, without giving thought to the ages of the existing employees.

Another issue that the new employer may face, is that the newly appointed employees  may demand that the retirement age for the all the employees be increased to 65 years. 

Manie Havenga
Havenga & Viljoen Attorneys

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## Dave A

> The other issue is the attitude of the person who asked me the question. If you say that a person of 60 years of age or older are unproductive, then you may open another can of worms, and that is possible discrimination based on age.
> 
> I know people of 60 years and older, who are much more efficient and productive than the 25 year old who was appointed recently.
> 
> Admittedly, yes, when it gets to hard physical labour, it is very possible that the 60 year old is far less productive than the 25 year old.


Pretty much what was going through my head too. Even with the physical labour side, you'd hope there is some level of progression within the organisation that mitigates that. 



> But that is not the point I wish to drive home or discuss.


My apologies for the distraction, but as a manager of sorts I found it an interesting sub-issue.  :Sorry:

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## sterne.law@gmail.com

A number of interesting options and questions pop up.

The managers intent is the worrying point. I get the feeling that he wants to reduce staff without a retrenchment pay out. The question is why has it suddenly come to the fore, as the tone of teh message does not seem to indicate that a person has turned 60 and tehy now want to retire them. Forced retirement is obviously a natural transgression in lieu of retrenching. No doubt, the statement, that they are passed productive stage is an excellent indication of his plans. And, as you say, opens another can of worms.

A question that arises is the 60 year old retirement age - is that the company rule of their own or does the company rule say, as per the pension fund rules? It would seem unlikely that a company can be forced to abide by the pension fund rule, if their policy does not say as per pension fund rules.

I ask this because the 65 year bracket is per the newer employees pension fund rules and not employment contract, which changes the ball game. Further is the pension a benefit or part of remuneration. the relevance here being that benefits can be changed that much more easily than a remuneration element which is a contractual term.

I think also you hit the hammer on the head and an important issue is that these sort of things can be done, but there is a procedure, in this case consultation.

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## manhav

Yes, the manager's intent is quite clear, isn't it?

The problem is that the previous employer's policy regarding retirement age corresponds with that of the pension fund, which also states that the retirement age is 65.

The new employer's policy is that retirement age is at the age of 60. Now, they have several employees who believe they can only go on retirement as the age of 65. 

I do not know whether the pension fund was negotiated as a benefit or remuneration.

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## jinxster

If the peeps are over 60... who cares.

If the peeps are over 60 and not performing.. surely you can get them to be discplined into performing... else, we will have to let you go.... 

Seems like a bailout retrenchment policy... I had a chap register at our recruitment agency after a large organization closed their doors in George. Imagine retrenching a few 40 year service peeps... we cant afford you, and we cant afford to let you go... :Hmmm: 

He had (wait for it) 42 years of service, yes that is 42 weeks of pay. Though I think this company gave 1.5 weeks for every week in their retrenchment package. The dude is 60. He looks good to go for another 60, and truth be told, you wont easily find loyalty like that anymore..

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## sterne.law@gmail.com

> If the peeps are over 60... who cares.
> 
> If the peeps are over 60 and not performing.. surely you can get them to be discplined into performing... else, we will have to let you go....


Correct - poor work performance is poor work performance, no matter what the age.

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## Dave S

I speak as a layman here, but surely these employees have now planned for retirement at age 65 and their relevant pension/provident policies will pay-out at that age. If these employees were now to retire 5-years earlier, surely this would effect the pension scheme pay-out adversely and they may find they cannot afford to retire at 60?

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## SilverNodashi

I could be wrong, but wasn't this "law" introduced many years ago where many people @ the age of 60 didn't work as well due to health problems as others did? My recently deceased grandma still worked at an old-age home, taking care of elderly often younger then she herself, at the age of 88! My father-in is 65, and mother-in law is 63 right now and they still farm every single day of their lives. Sure, they got grey hair, but their health is in excellent condition. No hearing aids, or wheelchairs or anything like that. 

My dad is a mining engineer and manager, and he's aged 56. I seriously doubt if he'll retire @ 60, or maybe even 70 for that matter. 

People tend to get older these days and are more fit & healthy than say 50 / 80 years ago. ..... I'm just throwing a stick in the water with this one, but is it really necessary to dismiss someone because they're 60 and an old regime / law said they had to retire at that age?

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