Suppose that you are looking at cost-effective ways to retain employees. One idea is to give those with five years’ service an extra day’s annual leave. Is this still possible or does the Equality Act prohibit this type of reward?
It costs a significant amount of money to hire and train an employee. So retention of (good) staff is a key concern for any employer. One idea is to reward those who reach five years’ continuous service with an extra day’s annual leave. Because it is so cost-effective, this is an attractive option and extra leave entitlement may also be mooted for future long-service milestones for example 10, 15 and 20 years.
Does this approach actually comply with current legislation? If so, what should you be doing before going ahead?
The current law
When it came into effect on 1 October 2010, the Equality Act 2010 absorbed many of the anti-age discrimination provisions that were set out in previous legislation and consolidated them in one place. The basic position now (as set out in Schedule 9 of the Act) is that long service awards can only be made to employees if they are used to reward service of five years or less. In this type of situation, no justification for the benefit is required.
However, if you want to award benefits to those employees with longer periods of service in other words, those with more than five years there is a potential ’get out of jail’ option available to you. It will exist only where an employer "reasonably believes" that there will be a business benefit gained by linking length of service to the accrual of an award.
The most common reasons successfully used to justify long service awards under this exception are as follows:
1. To encourage employee loyalty that is, to incentivise individuals to remain in your continued employment;
2. To enable you to reward and recognise those staff who have attained long service.
Such recognition is important, because a long-serving employee will have accumulated considerable business knowhow. This doesn’t just refer to knowledge of the job, but also knowledge of how your business operates for example, the internal politics, the informal networks, the clients and where the power-base lies. Retaining such knowledge within your organisation can be invaluable.
Thankfully, this ’business needs’ test is easier to fulfil than the standard one used by the tribunal when assessing age discrimination claims. For example, there is no need to show that linking an employee’s long service to additional paid annual leave is proportionate. To put it another way, you won’t have to prove there is a less discriminatory way of retaining staff.
Although the standard is much lower, you will still need evidence available to back up your decision. A positive staff survey on the award would probably be enough here.
Document your findings: in particular, record the percentage of employees who support your proposal, why it is favoured and if any alternative ideas put forward were rejected.