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Managing Employees Nearing Retirement Age


More and more workers today are extending their working lives and are choosing to remain working beyond retirement age. Employers today are tasked with managing an aging workforce, ensuring they continue to engage, motivate and develop their team to ensure they are getting the best out of their teams. However, what if you are faced with an employee approaching their retirement, who has one foot out the door and is not interested or willing to entertain new ideas, changes or take on new projects?

In this scenario, the employer needs to be careful about the actions they take. In Australia it is illegal to force or persuade an employee to retire. Under the Fair Work Act 2009 (Cth) (the Act), a forced retirement would constitute unfair dismissal if an employee were dismissed, and their age is the predominant reason for the dismissal. A forced retirement may also constitute discrimination, which is prohibited under the general protections provision of the Act.

Can I ask employees nearing retirement age to retire?

Generally, no. It is illegal to sack an employee or force an employee to retire because they are “too old”. This means employers cannot:

  • retire an employee;
  • persuade an employee to retire; or
  • or treat an employee in a way that they are forced to retire.

How do I manage employees who are nearing retirement age?

Members are reminded that you cannot terminate an employee on the basis that the employee is unable to perform their duties because they have reached a certain age. Employers can consider implementing a policy that may offer retirement benefits and support to employees who are approaching retirement age or who are looking to transition into retirement. However, retirement policies should not be drafted or implemented in a way that might be interpreted as forced retirement.

If you believe an employee, who is approaching a certain age, is no longer perform their duties, you should follow the company’s usual and lawful procedures for addressing deficiencies in an employee’s performance. A formal performance review is the best approach provided that the employer has a performance review system applied to all employees on a regular and objective basis.

If the performance review indicates a deficiency in the employee’s performance, it may be necessary for the employee to be put on a performance management plan. However, you cannot merely state that the employee is unable to perform their duties because they have reached a certain age. The employee’s performance will need to be managed in the usual and lawful way that you would with employees of any age. If the employee’s performance does not improve the employee may be terminated on the basis that the employee cannot perform the inherent requirements of the job.

What do I need to do prior to terminating someone for poor performance?

Employers are required to provide the employee with procedural fairness. This means the employer will need to ensure that the manner or process of dismissal is just, not harsh, and reasonable.

Therefore, before terminating an employee for poor performance, it would be recommended that the following satisfied:

  • the employee has been provided with substantive and procedural fairness
  • where applicable any performance management plans and relevant workplace policies have been complied with
  • written communication/warning has been provided to the employee that their poor performance may result in termination
  • the employee has been genuinely afforded an opportunity to respond to the warnings or allegations
  • the employee has not been denied the opportunity to bring a support person

If you need assistance in relation to employment issues or managing the performance of your employees, contact our Workplace Relations and Legal Team on (02) 6175 5900.