Andrea Bull: Hello and welcome to the latest in the series of our All About Age webinars. So today's presentation, it is going to last for about 35 minutes and then we will have about 10 minutes for your questions at the end. Just a couple of housekeeping points. So the Webinar player, it has got a few simple controls. You will see the volume adjustment and full screen option in the bottom right hand side of the player. There are also some tabs along the top. You can click on those to access details of today's presenters, the slides and also a recent alert that we have done on age discrimination. You can ask us questions at any time. We would really recommend and hope that you do that so please, please do it, don't be shy. Click on the 'Ask a Question' tab, type in a question and then click 'submit'. We will try to answer as many as we can in the time available and also there is poll tab, don't worry too much about that, we will be doing some interactive polls throughout the webinar to keep you awake and see what you think of various things so we would encourage you also to participate in those. If for any reason you cannot see the current slide, just click on the slide tab to get back to it. Ok, so over to today's presenters. We have got Richard Lee and Sinan Alnajjar, who are both from Wragge Lawrence Graham and they advise on pensions and employment law. So, over to them…
Richard Lee: Thanks very much Andrea, its Richard. Welcome again to the third in our series. We have been previously looking at fuller working lives and older workers, benefit provision, healthcare and now today we are looking at the younger generation. So Sinan and I will be working our way through the webinar. Again, as Andrea has said, please fire in your questions, let's get some webinar age chat going on. We are happy to take and deal with as many questions as we have time to cover today. So the introduction is there laid out for you, what we are going to cover. Sinan is going to deal with recruitment and promotion in terms of younger people and also flexible working requests. I will then move in and deal with savings strategies, workplace saving strategies and how you incentivise younger workers now that we are moving into new world of pensions savings and then finally back to Sinan for some redundancy and in particular age-related redundancy issues. So that's me, over to Sinan.
Sinan Alnajjar: Hello everyone. So starting off at the risk of sounding like we are trying to be controversial, I would say it was arguable that at the moment older workers have really never had it so good in terms of the focus which employers and also the government are putting on their rights and there is evidence to back up that bold statement as well. In July of last year we had the government appoint Rosalind Altmann to the role of what is called Business Champion for Older Workers and her remit in that role was basically to make the case for older workers within the business community and to tackle outdated perceptions of older workers and as we mentioned in the invite for this webinar, last year we had the Department for Work and Pensions paper which was called 'Fuller Working Lives – a Framework for Action' and that aimed really to be a new plan of action to help older workers stay in the workplace and really try and shift the conversation about extended working life from this kind of working until you drop which isn't really helpful for anyone to one about enabling people to create the future which they really want. Those were the buzz words around it. We actually wrote an article on that paper which is on the website in the contents section of this webinar as Andrea said if you want more detail on it.
So you have got all this going on and we can really see a wiser, more generaldrive on the part of the government to highlight the benefits to individuals and the benefits to business and actually the benefits to the economy as a whole with people aged 50 plus staying in work. There is definitely, I think Richard you would agree, a kind of growing recognition, and he is nodding, that retaining the skills and experience of older workers makes sound business sense, But what we wanted to do today was look at the other end of the scale and whether we are in danger of neglecting our younger workforce and also potential younger workforce. So there was a recent McKinsey paper, a report called 'Tackling Youth Unemployment' and it was really interesting and it highlighted what we all regularly see reported in the news and that is that youth unemployment in Europe is almost unsustainably high. We have got eight million people who are in education or work and everything is set out on the slide there but they are the statistics that we are looking at. Current rate of youth unemployment in the UK is at a record high and there is lots of evidence to say that it was the younger workers on the spectrum that got hit hardest by the recession, 21,000 unpaid interns currently working across the UK, so all of those stats really reflect that. So you have got unemployment and also at the same time kind of running concurrently you have got a vicious circle of younger workers losing out on jobs due to lack of experience and that is really demotivating an entire generation when it comes to looking at working.
So, as Richard says, we have carved out some specific topics that we want to talk about and the first one I am looking at is age discrimination in the area of recruitment and promotion. Quick refresher. The Equality Act 2010 prohibits discrimination on the grounds of any age unless it can be objectively justified, that is it’s a proportionate means of achieving a legitimate aim. So the UK legislation, despite a general perception and also the high profile cases that we tend to see coming out of the media does not only protect older workers or workers over a certain age, for example as it does in the US. In terms of recruitment and promotion there is actually not a heap of case law, and we promise that we have done our research for the webinar, butthe fact that there is not that kind of mass of case law in this area is almost a talking point in itself when you look at the youth unemployment figures. It is always going to be difficult to ascertain an employer's true reasoning for not recruiting or not promoting a younger worker, But there are some obvious steps that employers can take to avoid discrimination against younger workers. For example, any requirements which you as an employer apply to recruitment or promotion which are ostensibly neutral, for example a requirement for 10 years' experience which applies across the board to young and old alike, that could indirectly have the effect of disadvantaging employees of a particular age group because obviously the younger employees, sorry, younger people, are less likely than more senior people to have this level of experience and as a result those requirements are potentially indirectly discriminatory under the Equality Act 2010. There are other pitfalls in this area too. Employers need to carefully consider their recruitment processes to ensure that they do not include requirements to hold particular qualifications which generally only more experienced individuals would have the opportunity to get. Reviewing job descriptions and offer letters is a good place to start here as well as kind of thinking strategically about what you really need from your interview candidates, and as I said, whilst litigation in this area is rare, it is good practice to keep refreshing thinking on this.
Aside from specific age discrimination traps, more widely you might consider the role that your business plays in promoting access to employment through work experience or internship programmes or other similar schemes to ensure that you're striking the right balance between retaining and recruiting the best talent in the market. So what about discrimination against younger workers who have actually managed to secure a job? Well the right to request flexible working has been quite a hot topic since the statutory scheme was extended last yearfrom those who just had recurring responsibilities to all employees with 76 weeks' continuous service. In terms of process, we know the background to that. Employers have to deal with requests in a reasonable manner, notify the employees of the decision within a certain period and only refuse the request on specific, prescribed statutory reasons as set out in the ERA. If an employee's request is refused, they might have a claim under the statutory flexible working provisions but also the individual may be able to bring discrimination claims.Traditionally there is a lot of focus in this area on sex, di
Sinan Alnajjar: ility and I guess as well religion or belief discrimination claims, but there is less coverage of the risk that employers may inadvertently discriminate against younger workers in refusing requests. So, for example, when considering flexible working requests, are you prioritising the ones from your more experienced staff in order to keep them happy and keep them on side? Do you value your younger workforce in the same way? From my experience with clients, employers expect that the change to the flexible working request regime will, and in fact has, led to employees requesting reduced working hours as a kind of lead into retirement. That thinking has been built into workforce planning, I think, to some extent but have the same employers given the same thought to dealing with requests from younger workers who might want to work reduced hours for some other purpose, say time off to pursue a hobby or to learn a language or some other skill outside of their job which might be complimentary to their job? It might not be but it is something to consider and, actually, it is unlikely that the younger worker would even be as comfortable to make a request like that because there is a whole range of unhelpful stereotypes in this area: that they are lazy, that they have an unearned sense of entitlement or a lack of ambition to succeed in their chosen career. If they do follow through with a request, what is the risk of the employer viewing it as a lack of commitment to the business and not looking at it properly, applying proper consideration? The limited upside for employers is that in this area specifically is that tribunal claims from younger workers seem to be quite rare, fairly rare, and that is probably because those younger workers are generally less aware of their rights. So, there are pitfalls here which all employers need to be aware of and the way to deal with this is thorough and well drafted discrimination policy, also diversity training helps to make sure that younger workers don't get left behind in equality terms and those things also help mitigate the risks of being at the end of a claim from the younger section of the workforce. We have got a poll on this which I think Andrea will take you to.
Andrea Bull: Yes. OK. Poll time, this is the first one. So just about to send it to you now. When did you last review your age related policies? So just an idea here of how long ago it was. Was it 0-3 months ago, 3-6 months ago, 6-12 months ago, over 12 months ago or we have never reviewed them. So I will just give you a few moments here now to answer that one for us. OK. I am showing the results now. So, there they are. We have got 55.6% of you saying over 12 months ago.
Sinan Alnajjar: And this is the part where I have to say something interesting about which we have just looked at and I think really what you draw from that is that employers need to be looking at their policies more regularly because, just in terms of age, we have the default retirement age which has obviously gone now, are there still those provisions in your handbook which you may not be applying regularly but it's still there, it needs to be changed and it needs to be looked at. So that is quite interesting.
Andrea Bull: OK. On to Richard.
Richard Lee: Thanks very much, yes fascinating. Review your policies more regularly I would say, never discount the discrimination risk. We have got some questions coming in, I am just going to throw one out there and get some webinar chat going. Generation Y: myth or reality? Well, we haven't got three hours, we have only got 30 minutes. My own view is that I think it is part a myth, part reality. I think generally working patterns are dictated by the economy, essentially. In the UK at the moment we have got pretty high levels of employment compared to in Europe and the result of flexible working for example. Generation Y on the other hand is an individual piece around potentially not making work the centre of your life and working possibly three or four days a week a 60% or an 80%. So I think part myth, part reality and personally, as per discrimination, it is a very individual thing but happy for people to keep mailing in and if you have got more views on generation Y, like them, hate them or just think it is a complete smoke and mirrors exercise then happy to keep taking those. We have got some more questions we will come onto but I will move onto my piece on workplace savings for the younger generation. So traditional model in the UK. Pensions - employer focus on that. Funding DB, defined benefits, final salary schemes, whatever your language is. Those schemes generally provide what we would say is an adequate level of income in retirement - If you are very lucky, up to two thirds of your salary potentially, but certainly a good level of income in retirement when you have fewer financial commitments, the mortgage has gone, you have sold the children off and things are looking quite bright for you. What has that meant in the past? No employee engagement really. They may have paid employee contributions into the pension scheme but at the end of that working life they will then pick up the final salary pension and sail off on the yacht into the Bahamas. So, the generation after that really has not had any experience of having to engage with pensions.
So we look at the next slide. Nowadays, so I think that in 2000 I remember stakeholder and everybody was supposed to start to get engaged with that and, lets face it, it was all a bite of a damp squib. Didn't happen, didn't increase overall levels of pension savings. So we then hit 2012, Steve Webb and auto-enrolment. So huge shift in terms of UK pension savings going away from defined benefit into defined contribution. The Pension Regulator's latest numbers on this are pretty incredible. 20 million UK workers have now been through auto-enrolment. Over that 9 million now still in defined benefit, about 7 million newly auto-enrolled, mostly of course into DC defined contribution and an interesting category, 5 million have been through auto-enrolment but have not been eligible to be enrolled or to join. So you still have a substantial number coming through who have no pension provision. George Osborne's Budget, which we will come on to talk about, the 2014 budget was introduced. Some flexibilities which are ground breaking and also the move away from pensions, so pensions ceasing to be the central plank of workplace savings. For example the new and increased levels of ISAs which are available. So all in all it is pointing to a move away from pensions as being the traditional savings vehicle and towards greater individual responsibility. So, here is a slide with a couple of clouds on just with some classic thoughts from some stereotypical younger workers.
The only way I am afraid that we are able to talk about this. So for individuals in the, for example, 18 – 29 category, the research shows that individuals would want to save more for retirement but of course there are competing demands. Research also shows that as individuals do get older and earn more, the levels of savings into pensions and, of course, their overall knowledge of pensions, increases. So, what are the barriers to pensions savings? Just a little bit more on that topic. Information and the lack of it. A recent survey showed that in the 18-29 year old bracket, 81% of individuals surveyed had no real understanding of pensions and half of those did not know how much they were contributing. So a real of ignorance out there. I think the problem with information is there is either too little or too much. Incentives, well there are some: the tax relief and there are matching employer contributions, but the incentives bump up against the arrow on the other side, the competing demands for people's money which we will come onto, and again the lack of understanding at the bottom will hopefully be dealt with by the new initiatives post-April linked to the Budget so financial education. Those competing demands for money, whether they be mortgages to get on the property ladder, whether they be spending on student loans or for childcare, they are there and they are short term. Getting beyond the short term nature of saving has always been a real challenge. So we are onto the next slide. How do we incentivise the younger workers to save for retirement? So we are dealing with now going forwards, what can employers do? Tax relief is still very much there and can be emphasised and the employer contributions. Employers can use a simple message which is: this is free money. If you don't take this, then you are simply losing out. Yes, it is locked up for a substantial amount of time but it does give you savings for your later working life. What is probably new is going to be emphasised going forwards is financial education.
There is going to be a real push on that. As I say, post-Budget changes in April this year, there will be the Pension Wise service and that will obviously be available for people who are at the 55 plus age group in terms of taking pensions, but the whole emphasis on financial education which is being pushed through by the government will now start to work through into the younger generations. At least that is the hope. Better communication: absolutely key. Individuals to understand what they are actually going to get for their investment savings in the future, what it means in terms of the flexibility that they will have in the future and what they will be able to do with that in terms of providing for their families. So they can emphasise very personal messages about the incentives to save for retirement. But we still do lack, in the UK, the flexibility that exists for example in the United States, with 401K plans and the ability to take money out of those plans earlier than retirement dates. So I just wanted to link that in to some of what Sinan has been talking about in terms of age discrimination and the need to be careful around setting up DC arrangements with age related contributions. It's quite common that DC schemes use age-related contributions and clearly the rationale is that younger workers have longer to build up their pensions pot than older workers, therefore the emphasis on higher contributions for older workers. The question that I think I'm asking after the generation Y piece is whether this is still right for your workforce; have you done the demographic analysis? and also have you seen the pattern in terms of how your workers are staying on beyond normal retirement age? so what's the proportion of workers? where does your age demographic lie and actually should you now be moving to a flat rate contribution? does the age related contributions actually meet your requirements? So we do recommend that you're reviewing your DC structure with the new emphasis around governance of defined contribution schemes. It seems a good time to look at this all in the round and make sure that you are age discrimination compliant or at least age discrimination free. Just to build on the slightly broader picture on younger workers pay and reward - so as Sinan mentioned the various financial crises have tended to hit the younger workforce with very high levels of unemployment. In the UK our national minimum wage, it is quite common across Europe, is lower for the younger workers and the debate with the low pay unit around that is essentially that employers see the value that they get from their workers and if the national minimum wage hadn't been adjusted then many employers would simply not employ younger workers because they would not feel that they were getting the value that they wanted. So there is still quite a dividing line in terms of economic and financial analysis for employers.
What sort of reward structures are we looking at, very interested in seeing some of the views if you want to email in as to what you do or don't do for specific age categories. Clearly individuals change jobs a lot more frequently depending on the sector, in particular, but it does seem if we believe the research from generation Y that younger workers aren't solely driven by financial rewards and employers need to recognise that within the workplace. So how do you respond? move away from the one size fits all the gradual progression with pay rises up the career structure, is it time to ditch that? What are the other incentives apart from financial rewards and pensions? so flexible working, unpaid leave,
Sinan Alnajjar: baticals, additional training, learning opportunities, pro bono, releases, all of which should be factored into the working structure for the whole workforce because, let's face it, if you only offer it to one age group then you may well be challenged, but certainly in terms of today's topic it really is worth looking at how overall individuals are rewarded and what they want. So just before we go back to Sinan maybe have a look at some of the questions. Some law, a couple of cases for you so the first case, and those who are reading the slides closely will clearly note that it was a case involving Denmark, this was about an individual who joined Experian's pension scheme aged 29 and it was a compulsory pension scheme and they had age related contributions. Under 35 - 3% and 6% from the employer, 35 - 44 - 4% and 8% and over 45 - 5% and 10% and the individual challenged this on the grounds that it was clearly age discriminatory against the young and the Court of Justice of the European Union said, actually, it is absolutely fine, it's justifiable because we recognise that those close to retirement need to have accelerated rates of contributions into their pension schemes, so that was fine.
In the UK as I think I mentioned we have explicit exemptions in relation to age related contributions into defined contribution schemes, so we actually could directly point to those if we were challenged. Then finally, Edie and Others v HCL Insurance case, so this was about an employer who had employees with a whole series of different benefit structures, working hours, annual leave, sick pay, PHI and they were going through some difficult times so they needed to harmonise to a lower basis of terms and conditions. They did that by saying to the employees we will dismiss and re-engage you, you need to agree to lower new terms. That happened, they did that and they were challenged on the basis that those changes, so linking ongoing employment to lower terms, was indirectly age discriminatory against a group of individuals between 38 and 64. The Employment Appeal Tribunal agreed with the Employment Tribunal that the requirement in order to remain employed that the individuals had to agree new contracts with worse terms was indirectly discriminatory, so that was indirectly discriminatory. But actually the employer justified that practice because it needed to reduce staff costs, and remember you can't solely justify on the ground of costs, but also to have in place a competitive non-discriminatory set of terms and conditions. So that's just a recent development for you.
Andrea Bull: OK and now we have a poll for you, so just putting it up now. So, have you ever been in dispute or been taken to the Employment Tribunal in relation to an age discrimination claim or any other age related dispute so yes or no?, we won't show who said what here, we'll just give a percentage so don't worry about that so I'd encourage you to answer that one if you could please, So I've got 74.4% of you saying no so that's good news but a quarter of you have had some kind of age related dispute or claim.
Richard Lee: OK thanks Andrea. I think that links well into the next piece that Sinan is going to move into. Obviously I'm sure a lot of people on this webinar who deal with Employment Tribunal claims would notice the fall away since the fees were introduced and maybe that's partly a reflection but certainly it does indicate that you need to be very aware of the age issues so over to Sinan.
Sinan Alnajjar: Thank you. So I'm also going to give you some law. I wanted to take a quick look at redundancy and age and, in fact while Richard was talking, we had a question in which was so on point it's just fantastic to deal with but I'll deal with it in a second. Just as a general note we tend not to concentrate on the younger end of the workforce when we think about redundancy policies but it's worth remembering that we need to consider the full age spectrum and especially when we're setting selection criteria. In order to be reasonable, redundancy selection criteria need to be objective and capable of independent verification. Ultimately this means that the criteria need to be measurable, rather than just being someone's personal opinion, and the question that was asked was: Can we still use length of service as valid selection criteria in a redundancy exercise?
The leading case on age and selection criteria is Rolls-Royce v Unite which told us that using length of service which is mixed in with the last in first out principle using length of service as a criteria in a redundancy matrix could be lawful and I stress could be lawful. Using length of service in the selection matrix did constitute indirect age discrimination against younger workers but in this case in the Court of Appeal, it was objectively justified. In this case the legitimate aims being pursued were the maintenance of a stable workforce during the redundancy exercise and also rewarding loyalty. When they looked at proportionality it was decided that the means of achieving those ends were proportionate, in that length of service was just one criteria of many and it was kind of all mixed up with that, it was consistent with the principle of fairness. So in short, the answer to that question is yes, you can use length of service, as your selection, as part of your selection criteria, but you need to be careful with them and you can't let it be the only criteria, and you need to make sure that the reason that you're using it is clear and defined before you set out to use it to select and you need to think about balance.
The final thing that I wanted to look at in relation to age and redundancy was a more recent case of Lockwood v DWP. So in this case Miss Lockwood, who was 26, took voluntary redundancy and under the DWP redundancy scheme she received a redundancy payment of nearly £11,000. But what was key in this case is, under the rules of the scheme, if she'd been 35 years old or over with the same length of service, and that's the key, the same length of service, she would have been entitled to nearly £17,000 more. So obviously she took up a claim for direct age discrimination but that was dismissed by the Tribunal, and then the EAT, on the grounds that, one, there was a clear and material difference between her age group which was under 35 and a comparative age group which was over 35, that's quite a confusing finding, I find that quite confusing, but ultimately there was lots of statistical evidence brought before the EAT to convince it of the comparative difficulties suffered by older workers when they lost employment and obviously that was quite convincing Although, actually, this case was appealed to the Court of Appeal and Miss Lockwood's appeal was allowed on this point and it was found the ET was wrong to have treated her age in comparison terms in that way, but where the Court of Appeal agreed with the original ET and the EAT decision was on the second point, that the less favourable treatment in this case was objectively justified by a social policy objective of producing, and this is a quote from the judgment, "producing a proportionate financial cushion for workers until alternative employment is found". That reflected the comparative difficulty of loss of employment suffered by older workers, things like finding another job and family financial commitments so the appeal was actually dismissed on that point.
Ultimately I guess this is a good, a good news case for employers in that it provides some reassurance that age based redundancy schemes won't, or can't, be easily challenged, but it's important to bear in mind that the DWP was armed with, you know, lots of compelling statistical evidence in this case of the different needs of the younger and older workers, and also removing age related disparities by levelling up the payments so that younger employees received as much as the older workers in these specific circumstances would have come at quite a significant cost to the tax payer. So there are specific facts in this case which helps be decided one way so you still need to be careful with that. That's really the end of the redundancy part.
Richard Lee: Thanks very much Sinan. So in summary, and if you're watching carefully, this slide might look incredibly similar to the introduction slide, but it's to remind you of what we've covered and we are going to just deal with some questions in a second. So recruitment and promotion processes, flexible working requests and the way in which the emphasis needs to be around the younger workers and how you deal with that in relation to succession planning, and requests, for example, from older workers to take time off to care for older parents. This is all going to start to become very, very real, very soon.
Workplace saving strategies, how do you engage the younger workers in savings generally when pension saving has always been very, very difficult to engage them? but auto enrolment has proved to be a huge shift in the way that is going to work and the way in which information is supplied and individuals effectively have been forced to save at least for a minimum. Just looking at the alternatives to traditional financial reward and what that might look like for younger workers, and then finally Sinan's points around the care needed in terms of redundancy selection and policy. So a couple of questions. Is it ok to include a requirement for a certain number of years' experience in a job advert and what do we do about that? So classic indirect discrimination problem here we need somebody with at least 10 years' experience and a 20 year old or a 25 year old is really struggle with that, meeting that criteria, so the answer is well what is your reason, what is your aim? Sinan What do you really employee to be doing in that role and maybe you can express it more clearly in that way in terms of the criteria that they need to meet in that way.
Richard Lee: So yes, absolutely agree from the double act here, that it's, to make it in terms of possible legal challenge, just focus on what skills you need the individual to have, you know, let's face it, let's be realistic, individuals who have been doing a job for 15 or 20 years might not be that good at it anymore, they might have lost interest, they might not have taken on the new skills, so just think hard about that before you actually include a particular number of years' experience and if you do, then just prepare to be able to justify why you've put that in there. There's another question about, similar but not the same, do you think competency based interview questions put younger people, younger applicants, at a disadvantage? I guess one point could be that younger people generally will be less experienced at dealing with interviews and tests within those interviews as opposed to someone who might have been through those processes more frequently, depending on what the competencies are within the process. Clearly, if they do require a certain amount of time to have been spent in a particular area or sector, then you just need to question what the purpose of that is, what is your focus in terms of checking the competency in a certain area. Certainly within the IT world now, and I was talking earlier about the younger workforce and the way in which they are, in the minimum wage terms, paid less, but the youngest CEO in the world is 8 years old. So now you know that might be fairly rare but actually when I was looking at that last night, there were quite a number who hadn't even reached 10. All of them are within most are within the IT realm and so again you know, it's turned the world on its head in terms of the working universe and clearly the owners and start-ups of some of the largest social media companies in the world are barely into their 30s if that. So the world has been flipped on its head in terms of skills and knowledge particularly where information technology is the front runner.
Sinan Alnajjar: In terms of that question specifically I think as an employee you can only go so far and you can only worry about thisso much and with competency based questions you need to make sure that the employee can do the job and I think if those competencies are broadened out as much as they can be, thinks like communications, team working, leadership, problem solving, anyone across the age spectrum can think of compelling examples if they present them the right way, so, there's always that to think about as well. RL Yep, so I think we are just about coming towards the end of our allotted time, almost 45 minutes. I hope and we hope that you have found that useful, thank you very much for participating. If you continue to send in your questions, don't be shy and we'll be more than happy to go back to you on those, and please do join us, we'll obviously let you know when the next in the series of All About Age will take place and also we will be very interested in hearing your views on what you'd like to hear about, was it useful hearing about younger workers? would you want to hear about older workers and what happens to those in the middle? and I still count myself as one of those, no matter what people say. So thank you very much.
Sinan Alnajjar: Thank you.
Andrea Bull: Ok and we've just got a brief questionnaire here now that I'm going to put on the screen for you so it would be great if you could please answer that for us. Just a quick reminder that you can download various materials like the slides, the recent alert that we did on this area and also we'll be putting a recording of this webinar on our website and letting you know when that's available, so if you want to watch it all again you can. So thanks very much everyone and thanks for the questions and thanks to the speakers. Bye.