An employer cannot force an employee to retire except in very limited circumstances.

In employment law, there is no set age for retirement. The common age for retirement is 65, as this is the superannuation qualification age. The retirement process is generally the same as for resignation.

Managing retirement well

Most employees will want to retire at some point. It’s wise for employers to prepare for this to encourage staff loyalty and productivity, and reduce any disruption to workflow.

A good way to manage retirement is phased retirement. This is where the employer, with the agreement of the employee, will reduce the retiring employee’s workload over a period of time. It allows the employee to ease into retirement and transfer their knowledge across the business. This can be achieved using flexible work arrangements.

When an employee retires, an employer should calculate their final pay (including any superannuation calculations) and follow the processes set out in resignation.

Exceptions to the retirement age rule

An employer cannot discriminate against an employee because of their age. This means that, generally, an employer cannot make an employee retire. However, there are some exceptions to this rule.

Employment agreement before 1 April 1992

Some employment agreements created before 1 April 1992 were allowed to specify a retirement age. The employer and employee must have agreed in writing to confirm this retirement age on or after 1 April 1992.

Other exceptions

·         Occupations in which the retirement age is set out in legislation, such as coroners and judges.

·         Where being a particular age or in a particular age group is a genuine occupational qualification for the employment. For example, some foreign countries prohibit pilots-in-command aged above 60 years from operating certain aircraft. In this situation, it may be justifiable for an airline to establish a policy which prohibits those over 60 from holding that position. If an employer wishes to rely on this exception, they should establish a policy to this effect and include it in the employment agreement.

·         Certain occupations including:

o    non-New Zealand crews of ships and aircrafts

o    domestic employment in a private household

o    certain work performed outside of New Zealand.

These exceptions won’t apply if the employer can make changes (that don’t involve unreasonable disruption) to the carrying out of their business so another employee can do the duties impacted by the exception.

Forced retirement outside of the exceptions

If an employer does force an employee to retire, and the situation is not covered by one of the exceptions, then the forced retirement can be challenged by raising a personal grievance. Make sure the employee doesn’t feel they’re being forced to retire, which will help prevent a personal grievance claim.

Reference: https://www.employment.govt.nz/ending-employment/retirement/

Penny Varley

Payroll Administrator