October 26th, 2012 / Insight posted in

New contract for an older worker

BN writes: One of my staff is about to reach his normal retirement age of 65. We have a heavy workload and have agreed that he will continue working for a few years. I am concerned that I will have a large liability for either a long period of notice, unfair dismissal or redundancy if things do not work out and I have to ask him to leave. How should I protect myself? Can I agree terms in advance with him?

Any worker whose service comes to an end after his 65th birthday is not entitled to statutory redundancy payments. Therefore unless your worker´s current contract provides for a payment owing to redundancy outside the normal rules, you will not be liable for redundancy payments if you ask him to leave. A worker may have a potential claim for unfair dismissal if he has worked for an employer continuously for more than one year, unless he has reached the normal retirement age (which is sometimes lower than 65 depending on the employment contract) or if he is 65 and over. Therefore you are not at risk on this front either. The existing contract automatically comes to an end on his 65th birthday if that retirement age has always been applied by you as employer. Therefore, the worker should expect to retire on his 65th birthday. But if your business has habitually allowed staff to remain in employment after 65, insisting that a worker retire can amount to dismissal. This could give rise to a breach-of- contract claim. Unless your contract with your worker says otherwise, he is entitled to one week´s notice for every year of service up to a 12-week maximum. Assuming that your staff have always retired at 65, you should agree formal terms with your worker under a new contract after the existing one expires. Although you have informally agreed terms it appears that you have not yet made a legally binding commitment. To protect your business, make sure that the written agreement complies with current employment legislation. If in doubt, seek professional advice.