Retirement is where an employee leaves their employment upon reaching a specified age by virtue of a contractual clause on retirement in the employee’s contract of employment requiring them to do so.
Where an employer has a clear retirement policy, e.g. ‘retirement will be at the end of the week in which the employee’s 66th birthday falls’, and this policy is included as a contractual term in the employees’ contract of employment, then termination under these circumstances is by operation of the contract and not by dismissal. However, such a clause will only be deemed allowable where the employer has objective justification for needing this policy. In effect, a retirement policy is age discrimination and quality legislation will not permit such a policy where the employer cannot provide an objectively justifiable reason for requiring it. Employers should also ensure that their retirement policies are applied evenly and consistently because if one employee works past the contractual retirement age there is potential for trouble in future where a different employee refuses to retire.