Benefits based on length of service: paragraph 10
Effect
819.This paragraph ensures that an employer does not have to justify paying or providing fewer benefits to a worker with less service than a comparator, should such a practice constitute indirect discrimination because of age. The employer can rely on the exception as an absolute defence where the benefit in question was awarded in relation to service of five years or less.
820.If the length of service exceeds five years, the exception applies only if it reasonably appears to an employer that the way in which he uses length of service to award benefits will fulfil a business need of his undertaking. For example, by encouraging the loyalty or motivation, or rewarding the experience, of some or all of his workers.
821.Sub-paragraph (6) contains provisions which ensure that in calculating an employee’s length of service previous service is taken into account where that is the result of the operation of section 218 of the Employment Rights Act 1996 or any other enactment such as an Order made under section 155 of that Act.
822.Sub-paragraph (7) defines what a benefit is and expressly rules out benefits provided only by virtue of a person’s ceasing to work.
Background
823.The intention is to replicate the effect of regulation 32 of the 2006 Regulations (as amended by the Employment Equality (Age) Regulations 2006 (Amendment) Regulations 2008).
824.This paragraph enables employers to continue to effect employment planning, in the sense of being able to attract, retain and reward experienced staff through service-related benefits. This exception cannot be used to justify the level of payments when a worker leaves as service- related termination payments are not a reward for experience from which the employer can benefit. Therefore, redundancy payment is dealt with separately.
Examples
An employer’s pay system includes an annual move up a pay spine, or a requirement that a certain amount of time must elapse before an employee is entitled to be a member of an employee benefits scheme. Provided that the pay spine or time it takes to get the benefit is no longer than five years or can be justified the exception will apply.
An employer’s terms and conditions relating to annual leave entitlement provide that employees are entitled to an additional five days’ leave after ten years of service. Such an entitlement needs to be justified as reasonably fulfilling a business need.
