Retirement rage and maternity misery?

5 October 2010

In the last week, we have seen a number of measures proposed and adopted which have caused more than a few Gallic shrugs and even some raised eyebrows elsewhere in Europe.

Nobody can have failed to spot the outrage in France in the lead up to last week’s Senate approval of the pension reform bill which will raise the retirement age there from 60 to 62. In the same week, increases in the State pension age in the UK were brought forward so that within the next decade, both men and women will have to work until 66 before drawing their State pension and that is anticipated to rise even further, to 68 by the year 2046.

At the same time, consultation has closed into the removal of a “default” or “normal” retirement age in the UK. From April 2011 it is likely that the legislation will be changed to remove an employer’s ability to “retire” its employees at 65, although there are transitional arrangements for the period between April and October 2011 if the retirement process has already begun.

It was thought likely that the retirement age would be raised gradually in line with the pension age, but the Government has moved faster than anticipated by simply proposing to do away with it altogether. It has yet to confirm how employers will be permitted to address the rising cost of providing insured benefits such as life assurance and critical illness cover, and the fact that income protection policies historically have paid out “until retirement”. There is also a question around the leaver provisions in share option schemes, which have generally classed those who leave through retirement as “good leavers” and those who leave voluntarily as “bad leavers”. It may be harder to distinguish between them once the retirement age is abolished.

In the brave new world without a default retirement age, employers will still be able to justify it “objectively” ­ but the Government points out that this will be a high hurdle to overcome and the likelihood is that most employers will fall short.

And while the spending cuts were being announced in the UK Parliament, in Brussels MEPs were voting to increase paid maternity leave by a substantial margin. Instead of an entitlement to six weeks at 90% of pay, women would be entitled to 20 weeks at full pay. Estimates suggest that this would cost the UK around £2.5 billion a year ­ effectively wiping out the benefits of the new banking levy. But would it? Women’s employment rates are understood to drop by more than 12% when they have children, and in countries where maternity leave provisions are more generous, female employment rates are higher ­ something seen as critical for economic sustainability.

While this proposal is a long way from being passed into legislation, and will be met with strong resistance from the UK, Belgium, Germany and Spain among others, it might yet become part of the shifting sands of employment law that could change the working landscape as we currently know it.