Our employees accrue holiday entitlement and sick pay benefits on an increasing scale up to ten years of service. Will this be unlawful after 1 October?
Because they are linked to time, service-related benefits are indirectly age discriminatory. Despite this, the UK government has decided that all service-related benefits up to five years should be exempt and are therefore lawful. If employers chose to retain any benefits that apply after five years they will require what some lawyers describe as a subjective justification, which is a much less demanding threshold than a full objective justification. It means employers are required to demonstrate a reasonable belief that any benefit meets a business aim and supports a business need in encouraging motivation, rewarding loyalty or recognising experience.
The Employers Forum on Age believes many employers will retain holiday and sick pay entitlements that continue to accrue for more than five years’ service, although there are already signs that some schemes are being reconfigured to be less indirectly discriminatory. However, all entitlements (contractual or otherwise) given over five years of service should be reviewed, and employers should keep clear records of the discussions it has on these issues as well as involving staff and unions. Employers need to be clear that any long-standing entitlements that remain support a well-thought through reward and benefits strategy, and effectively underpin employee retention and engagement.
Freda Line, head of employer relations at the Employers Forum on Age