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Managing retirement is something that almost all businesses and employers have to do at one point or another. This will occur as older employees decide that they are ready to finish up their careers. However, there can sometimes be complications with retirement. This may be from a business perspective or because an employee decides they do not want to retire completely. This article sets out three tips for managing retirement in your workplace, including the: 

  • possibility of phased retirement if the employee would like to do so;
  • distinction between traditional retirement and medical retirement; and
  • need for a consistent good faith approach in managing older workers. 

Consider Phased Retirement if Employees Would Prefer it

Phased retirement can be a great option for employees who would like to retire but still keep working in some capacity for a certain period of time. Phased retirement is where an employee continues working but on a reduced basis. The workload reduces over time until the employee fully retires. 

There are benefits to a phased retirement system for both employee and employer. The employee gets the benefit of slowly entering retirement rather than immediately ceasing all of their work. It can be a great way of continuing to contribute while slowly easing off the intensity of work.

For an employer, phased retirement means that you continue benefitting from the institutional experience and knowledge of the retiring employee. There is an extended time period where the employee can pass on their knowledge to their eventual replacement or other staff in the team. It can also be a good way of ensuring that a valued team member can leave with dignity and still make a strong contribution to the business.

Remember the Distinction Between Retirement and Medical Retirement

It is important as an employer not to get confused between medical retirement and ‘traditional’ retirement for older workers. This confusion can be understandable if an older worker has to go through increased medical treatment or the like. Still, medical retirement is a separate concept from the perspective of employment law. 

Medical retirement refers to when an employee leaves their role due to illness or injury. It is unlike the retirement of an older worker who is intending to finish their career altogether. Instead, after a medical retirement, an employee will usually work for a different job they can complete, even with their illness. Medical retirement must be agreed to by both the employer and employee. Usually, it is a preferable alternative to a medical incapacity process.

Therefore, it is important to distinguish between employees who are choosing to retire altogether and those who cannot do the particular role due to an illness or injury. 

Take a Good Faith Approach to Older Employees

It is very normal for older workers to look to retire. Employers should do their best to help employees leave their careers with dignity and feeling satisfied with their contribution to your business. There is no set age for retirement in New Zealand. Although, 65 is relatively normal for retirement due to that being the age for qualifying for superannuation. You should act in good faith towards older employees and not necessarily assume that all of your employees will want to retire as soon as possible. 

Note that employers cannot discriminate against an employee because of their age. This means that, generally, an employer cannot make an older employee retire.

However, there are some narrow exceptions, such as when being a particular age is a genuine occupational qualification for the role. In general, however, you should take a good faith approach and wait for an employee to come to you when they eventually look to retire. 

Key Takeaways

Managing retirement can be a tricky task in the workplace sometimes. However, as a manager, there are certainly things you can do to best meet the needs of both the: 

  • retiring employee; and 
  • your business. 

For instance, phased retirement, where the retiring employee continues working but has their hours and work slowly reduced over a period of time, can offer both the employee and business benefits if all parties agree. However, make sure to be aware of the difference between medical retirement and ‘traditional’ retirement. Additionally, you should approach retirement discussions with employees in good faith. As a general rule, do not try to force older workers to retire. Instead, get legal advice if you think there is a specific reason why older employees should not continue in their roles. 

If you would like more information about managing retirement and retiring workers in New Zealand, contact LegalVision’s employment lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

Can employers force older staff to retire?

No, employers cannot generally force employees to retire, and this would commonly be treated as discrimination based on age. However, there are some narrow exceptions, such as when being a particular age is a genuine occupational qualification for the role. 

Do employees have to agree to a phased retirement plan?

Yes, employees must agree to a phased retirement where their hours and work are reduced over time. 

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