Is it Age Discrimination to offer staff a reward when they reach certain milestones of service with your organisation?
For example, if you have a policy of buying a carriage clock or gold watch for members of staff that clock up 25 years’ service or maybe you grant additional annual leave once the employee clocks up 5 years’ service.
Age Discrimination occurs when somebody is treated less favourably due to their age. Potentially a policy such as those described above might exclude younger workers as they are too young to have accrued the length of service to qualify for such an award. The Equality Act 2010 deals with this issue and therefore sets a benchmark that organisations should consider when developing their reward strategy.
The Equality Act 2010 Schedule 9 Paragraph 10 states:
“(1)It is not an age contravention for a person (A) [the employer] to put a person (B) [the employee] at a disadvantage when compared with another (C) [the work colleague], in relation to the provision of a benefit, facility or service in so far as the disadvantage is because B has a shorter period of service than C.
(2)If B’s period of service exceeds 5 years, A may rely on sub-paragraph (1) only if A reasonably believes that doing so fulfils a business need.”
What this actually means is that any Long Service Award that relates to a service milestone of more than 5 years must fulfil a business need to amount to a defence against an age discrimination claim.
Going back to the examples above – a carriage clock or gold watch awarded to a member of staff for clocking up 25 years’ service will normally be discriminatory unless the employer can justify this as a business need. Which in practice might be difficult but certainly not impossible. It is generally accepted that the threshold for demonstrating that there is a business benefit associated with awarding employees for long service is less of a challenge than treating people less favourably due to their age in other circumstances.
An example of a business need that could be accepted as genuine could be the requirement for retaining staff that have had a lengthy period of development – so that the organisation is able to achieve a return on their investment. However, 25 years might be a bit of a stretch! Another example might be linked to retaining staff towards the end of their career to become coaches and mentors, especially in sectors where ‘old school’ techniques need to be passed on. Some employers might also look to reward staff simply for their loyalty – the impact of loyalty is harder to demonstrate but if the employer can prove this is valued by the employees, and is attainable at different milestones and not just lengthy tenures, then this is also likely to be acceptable.
Something to bear in mind, Long Service Awards may be taxable and need to be reported to HMRC depending on the value of the award and at what point in the employee’s career they receive it. According to gov.uk:
You don’t have to report or pay tax on a non-cash award to an employee if all of the following apply:
- they’ve worked for you for at least 20 years
- the award is worth less than £50 per year of service
- you haven’t given them a long-service award in the last 10 years
For example, you can give a non-cash award with a value of up to £1,000 for 20 years’ service.
Taxation is a little more complex than this though so do check! Or for more detailed advice and guidance, contact us at hello@contracthrm.co.uk.