Rewarding employees for long-service has remained a grey area for many employers and HR practitioners due to the introduction of age discrimination regulations in October 2006. The regulations state that any contractual benefit which is subject to an employee reaching a certain age or which increases with length of service is potentially age discriminatory. At the stage of introduction of this recent legislation, around 36% of organisations provided benefits to their staff based on how long an individual has worked for them. Employers have now had to look at their long-service awards as part of the auditing process in response to the age discrimination legislation.
As we see a shift from ‘jobs for life’, many employers now raise concerns and question what are the best measures to put into place to retain loyal and experienced staff, ensuring long-standing commitment to the organisation? Are there any exceptions to allow offering long service awards?
Exceptions to the rule!
The first is the ‘five-year exception’. This entails any length-of-service award given in the first five years of employment is exempt from age discrimination regulations.
For benefits that accrue over longer than five years, there is a separate exception which requires employers to demonstrate that the reason for having a benefit dependant on length of service is to either ‘reward loyalty’, ‘encourage motivation’ or ‘recognise the experience of workers’.
Building a Case & Supporting Evidence
To justify a long-service award above and beyond five years of service, an employer will need to ‘build a business case’. Many employers look to recognize loyalty to the company and encourage staff retention.
What an employer must do is clearly show they have thought about how their long service award might be affected by the age discrimination regulations and come up with some evidence that demonstrates they have gone through this procedure and, importantly throughout, kept records of any decision making process.
Supporting evidence must be provided in the case of any challenge. This could include carrying out an employee survey for views on the benefit, seeking feedback during the course of exit interviews and monitoring staff retention statistics.
For example, if an employer says that they provide extra paid holiday to employees who have remained for six years and that this encourages loyalty, then the employer must have evidence that the extra holiday provision actually contributes to that legitimate aim. The evidence could include information the employer has obtained from monitoring, staff surveys or focus groups.
Therefore….
Long service awards that reward service beyond five years are exempt if you can show they ‘reward loyalty’, ‘encourage motivation’ or ‘recognise the experience of workers’.
But do not simply assume your long service award satisfies these criteria!
You will need to demonstrate that you have actively thought through how your long service award complies with age discrimination regulations carry out a full assessment of your benefit scheme, and collate supporting evidence to justify your decision.
Or, if you want to be certain there is no breach of age regulations, search for other means of rewarding loyalty and commitment. Are there any proxy measures you could apply? These might be successfully completing an induction programme, fulfilling particular training requirements or passing an internal skills or higher customer service standards test.
For further advice, or a review of your current benefit scheme, please contact a member of Gravitate HR on 0131 225 7458
