Retirement is a special moment in every employee’s life. But, to take a cue from the current McCains Pizza ad, retirement really is “nothing special” legally in that it has no special legal status in employment law and does not give rise to any retirement specific legal entitlements or obligations. In most cases it is really no different to a standard voluntary resignation. There is no compulsory retirement age in Australia (noting some statutory exceptions such as most police roles and the armed forces).
There are generally no special payments due to an employee on retirement. The only qualification is if there is specific provision in an enterprise agreement or contract of employment or an employer policy (which you should check). If you have long service leave or annual leave owing, then you may wish to take that leave so that it falls into another tax year so you gain some tax benefits. Similarly, superannuation contributions and benefits might have timing of retirement implications for an employee. You should also ideally ensure that any outstanding commissions or bonuses have been paid before notification of your retirement or otherwise ensure there are pro rata payment conditions. And if your employer has a share scheme, you should check to see whether retirement meets the “good leaver” conditions of the scheme. But, unlike redundancy, there are no special retirement benefits owing to retiring employees.
This works both ways. It means that a retiring employee has no legal obligation to give any lesser or greater notice than required by their contract of employment and award obligations. The timing of retirement is a matter for you the employee. Modern state and federal discrimination and general protections rights under the Fair Work Act prohibit treating an employee differently because of their age and, increasingly, employees are working until later in life.
But it also means that employers are under no obligation to treat a retiring employee differently to other employees. You should be careful not to slack off too much in the lead up to retirement or you may find yourself on a performance improvement plan (PIP). It may be that an employee feels morally bound to tell their employer of their intentions to retire in say 6 or 12 months or even 2 years time. If doing this, make it clear that this is a current statement of intention only. Just be aware that there is a real danger that the employer will take it as gospel and you will be treated as “Yesterday’s Hero” (apologies to John Paul Young). It is not discriminatory for an employer to discuss retirement planning and an employer will naturally want to start making plans about how your role will be performed when you have left. But employers need to be careful that their actions do not constitute bullying or discriminatory behaviour. Employees should be wary of letting themselves be forced into things like fixed term contracts, reductions of responsibility, mentoring themselves out of a job or “independent” medical assessments.
What about phased or transition to retirement options? Employees over 55 years of age are entitled to make a flexibility request which may include things such as a reduction to part time work or job sharing or a change of responsibilities. Whilst an informal request can be made, there is a formal framework under the Fair Work Act for such requests including that requests are in writing and employers have 21 days to respond. Employers are required to give these requests reasonable consideration and are required to seek agreement with an employee about suitable arrangements. There is an avenue to raise a dispute in the Fair Work Commission about fair process and whether reasonable business grounds exist for a refusal of the request. However, this does not guarantee you will get what you want. And be aware that these arrangements will usually involve a variation of the underlying contract of employment and employees should consider whether they wish to commit to a permanent change or not.
Enlightened and reasonable employers will be open to discussion about transition to retirement arrangements but not all employers fall into this category and you may find yourself on the outer quickly. If considering setting up your own part time consultancy or working part time or on a casual basis for another employer, just be sure to check any post employment restraint provisions in your contract of employment.
The key message is, when you are ready, retire on your own terms and don’t expect your employer to treat retirement as something special. Please contact us if you would like any further information or help.