Employers face a continued campaign for changes to age discrimination laws around group protection benefits after their proposals were rejected by the employment minister, Jim Fitzpatrick.
His rejection was of a briefing sent by employer representatives and the insurance industry at the end of last year that set out concerns that last October’s age discrimination rules, which prevent employers offering staff different terms and conditions based on their age, could lead to a down-grading of employee benefits and fewer people working past 65 years.
Employers have said that the cost of insuring older workers against death and long-term illness could rise greatly and consequently force them to either reduce benefits for all employees or stop them employing older staff.
In his letter responding to the issues outlined by the Employers’ Forum on Age (EFA), the Association of British Insurers (ABI) and Group Risk Development (Grid), Fitzpatrick said that it would be unjustifiable to allow employers to set an upper age limit on the provision of insurance-based benefits as had been requested.
He argued that employers under the EU directive are able to limit the availability of benefits as long as they could provide ‘objective justification’ such as, being left with insufficient funds for research and development to the extent that the business cannot remain competitive. However, he acknowledged that this employment tribunal option could prove costly and deter employers from going down the objective justification route.
Sam Mercer, director of the EFA, said it would challenge any proposals to introduce this option as it was a very grey area and she continued to express concerns that that the government would assume it was an issue that could be ignored. “We have done some research with our partners in the insurance industry and the feedback that they are getting is that what we predicted would happen is beginning to happen. Employers are thinking twice before keeping people on post-65 [years] because of the costs and when the time comes to review their employee benefits, particularly their critical income protection, employers are looking at whether they can continue to afford them in the long term and many are looking at converting benefits that were open until normal retirement age to fixed-term benefits.”
She added that if this were to occur, the state could end up having to fund workers after the fixed term expires which conflicts with the government’s agenda of getting people off incapacity benefits. At the moment, employee’s commercially-insured benefits help to keep the incapacity bill down.
The Department of Trade and Industry (DTI) has recognised the concerns and promised to continue to monitor developments, and maintain dialogue with employers and the insurance industry.
Sue Sneddon, employee benefits technical manager of Scottish Equitable and chair of the regulatory working party on Group Risk Development (Grid), said: “The underlying objective of the legislation is very good because it’s trying to encourage the employers to look beyond age in the people they employ.”
However, she will continue to lobby for amendments to the legislation. “We accept that it’s very difficult, but what we’ve said is if the state stops paying incapacity benefit at age 65 [years] because at that age someone will have access to a state pension, why can’t employers do the same, because the main reason that state benefit stopped at 65 [years] was cost? The legislation does not allow employers to use cost as an argument for not providing the benefit.”
The bodies involved will continue to research the impact of the legislation and another meeting has been scheduled with the DTI for September.