Most employees consistently work for most of their adult lives so they can enjoy the fruits of their labour in retirement. Retirement is not just an end to employment, but it is also a beginning to a new chapter of an employee’s life.
In this guide for employers and employees, we explain retirement in New Zealand, how employers can plan for an employee’s retirement, and ways Peninsula can help your business.
Retirement
There is no official mandatory age for retirement in New Zealand. Most people are of the understanding that 65 is the official retirement age, as this is the superannuation qualification age.
The retirement process is generally the same as handling a resignation. When an employee decides to leave the company because of age, it’s crucial for employers to ensure that the worker does not feel the retirement has been forced.
Key Things to Remember
- Employers cannot force an employee to retire, except in specific circumstances
- An employee must inform their employer of their decision to retire and intention to resign
- If it can be interpreted that the resignation was forced by the employer, then there may be a risk of a personal grievance.
- Both parties can agree to a plan to ensure the smooth transition and handover of responsibilities and the employee’s exit from the business e.g. flexible working or a gradual reduction of hours and workload.
Planning
Retirement is a natural end to employment and, in a similar method to resignation, should be managed to minimise disruption to your business and to promote a positive environment in the workplace.
One of the most mutually beneficial ways of managing retirement is to encourage a phased retirement. This ultimately encourages the employee, or employees, to think about their retirement planning and how they can ensure they leave the business with minimal disruption.
Importantly, when the time does come for an employee to retire, the employer should follow their usual offboarding processes. Their final pay should be calculated and processed and any company property in their possession must be collected.
Exceptions to the retirement age rule
Generally, an employer cannot make an employee retire, which could constitute age discrimination. However, there are some exceptions to this rule:
Prior to 1 April 1992, some employment agreements contained a clause where both parties agreed to a retirement age. Employers who want to enforce this clause are not recommended to impose retirement using this clause alone. Employers should use the appropriate formal process to discuss retirement such as welfare and consultation processes.
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, there are limitations in the aviation industry where some foreign countries impose an age restriction for pilots. Employers may want to establish a policy or include a clause in the employment agreement to address this if the role requires them to fly to these destinations.
- Certain occupations including:
- Non-New Zealand crews of ships and aircrafts
- Domestic employment in a private household
- Certain work performed outside of New Zealand
These exceptions will not apply if the employer can make changes (that do not involve unreasonable disruption) so another employee can perform the duties impacted by the exception.
Forced retirement outside of exceptions
If an employer does force an employee to retire, and the situation is not covered by one of the exceptions, then the employee can challenge the forced retirement by raising a personal grievance.
Personal grievances concerning forced retirement are investigated by the Employment Relations Authority. If a business is found to have retired an employee unlawfully, the penalties can be expensive. To avoid any personal grievance claims, take all the necessary precautions to ensure your employees do not feel they are being forced to retire.
Manage your employees with Peninsula
Employers should take care when an employee discloses their intention to retire and leave the business. This should be done keeping in line with employment relations and workplace health and safety legislation. We understand that you sometimes need external help to ensure that all your documents and policies are effective. At Peninsula, we offer tailored support and services that boost your productivity and level up your workforce. Call us on 0800215030 to learn more.
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