What does the Law say about Retirement

Celesté Snyders | SchoemanLaw Inc  

Category: Labour Law

Introduction  

The South African Labour Law does not make provisions for the retirement age for employees. As a result, the retirement age topic is the most ignored by employers – especially where the retirement age was agreed upon in an employment contract between the employer and employee.  

Employees should have a retirement policy to implement a retirement age in the workplace if and when the contract does not provide a retirement age.  

What does the Act say?  

One of the grounds for unfair dismissal in Section 187(1)(f) of the Labour Relations Act1  would be deemed to be automatically unfair if the dismissal is based on age. However, section 187(2)(b)2 of the Act offers protection to the employers if the dismissal was based on the agreed retirement age, then the dismissal would not be automatically unfair.  

What is the retirement age?  

The labour laws of South Africa do not stipulate a retirement age, and it is up to the employer to decide and agree upon a retirement age with its employees. When a retirement age is not stipulated in a contract but has been agreed upon between the employer and employee, the employer has the right to serve the employee with a termination notice.  

When there is no agreed retirement age or no mention of Retirement in the contract, the dismissal would be automatically unfair if the termination is based on age. Likewise, an employer would only be able to dismiss an employee if the dismissal is based on misconduct, operation requirements, and incompetence.3 

What happens if a retirement policy is in place, but the employee is still fit to work? Can an employer force an employee to retire? The Labour Court deems a dismissal fair when an employer terminates employment with the employee beyond the normal retirement age. However, in most cases, the retirement age is regulated by the employee's pension fund rules, should they have one. According to the pension fund rules4, members can continue to work until they are 67 and not later. The Labour Court relies on case law confirming that the normal retirement age cannot be reversed once reached unless a new agreement replaces the normal retirement age. Moreover,  unless an employer waives its rights to apply the retirement age, the employer is entitled to place the employee on normal Retirement at any time after the employee reaches the normal agreed retirement age.  

Conclusion  

Having a retirement policy in the workplace is essential to prevent employees from taking employers to court for unfair dismissal based on age. Should the employee work after the retirement age, both parties should enter into a new contract to stipulate the agreed retirement age unless the employee waives its rights to apply the retirement age. 

Celesté Snyders | SchoemanLaw IncAttorney www.schoemanlaw.co.za