End of mandatory retirement the start of work for HR

By Uyen Vu
|Canadian HR Reporter|Last Updated: 09/07/2005

As provinces move to eliminate mandatory retirement one after another, many employers may see the legislative change as a welcome cushion for the labour crunch anticipated when the first of the baby boomers retire.

For human resource departments, however, the gains will likely accompany a good amount of headache, at least initially, as they grapple with new ways of approaching issues such performance management and succession planning.

“This is going to be a big challenge,” said Sue Kathler, vice-president of human resources consulting at People First, one of the largest HR consultancies in Manitoba, where mandatory retirement has been banned since the 1980s.

Citing the injustice of discrimination on the basis of age, a number of provinces are drafting laws to do away with mandatory retirement. In early June, Ontario introduced Bill 211 to amend its human rights code to extend the protection from discrimination on the basis of age to people age 65 and older. If passed, the bill will come into effect one year after receiving royal assent.

Also in early June, New Brunswick tabled Bill 62, which would amend the section in the Human Rights Act that currently allows bona fide retirement plans and pension plans to discriminate upon the basis of age.

Since 1973, the province has prohibited age-based discrimination in matters of employment, except where there are bona fide occupational requirements or terms and conditions set out by bona fide retirement and pension plans. There’s no indication when the bill, if approved, will take effect. The government has said it will allow employers a period of time to adjust to the change. The passing of the bill would not affect employers’ ability to offer voluntary retirement packages on the basis of age.

For the HR professionals affected by the changes, the elimination of mandatory retirement would entail a flurry of work at the outset. They need to review contracts and collective agreements to remove any reference to a mandated time to retire, said Andrew Tsoi-A-Sue, group insurance consultant at Toronto-based Eckler Associates.

Organizations that intend to set an age limit for benefit coverage need to comb through contracts and collective agreements for language that indicates whether benefits apply to all active employees.

“From what we understand of the legislation, employers still have the discretion to provide benefits to medical, dental and insurance,” said Tsoi-A-Sue, referring to the bill introduced in Ontario.

There’s no obligation for employers to continue providing long-term disability (LTD) insurance to people working past 65, Tsoi-A-Sue added. Employees who have maxed out on short-term disability benefits may still need to be accommodated, as that duty still applies, but they won’t be eligible for income replacement as would be provided by an LTD plan.

Frank Zinatelli, vice-president and associate general counsel at the Canadian Life and Health Insurance Association, said in rolling back mandatory retirement, provincial governments have typically handled benefits requirements in a similar fashion.

“In Quebec, distinctions can continue to be made with respect to benefit plans. Employers can continue to use age as a factor if the risk determinations are based on actuarial data. In Manitoba, there is actually a similar provision about benefit plans,” said Zinatelli.

In Ontario, unions have decried the government for not accompanying Bill 211 with legislative change that would require employers to provide health and other benefits to employees age 65 and over. Wayne Samuelson, head of the Ontario Federation of Labour, has asked the Ontario Human Rights Commission to look into what he sees is another form of age discrimination.

In Quebec, where mandatory retirement has been deemed discriminatory since 1982, employers have learned to adjust the approach to such HR issues as performance management, said Jean Sauvé, vice-president of executive and total compensation of CAE, a company specializing in aviation simulation and modelling technologies, based just outside of Montreal.

Managers had to adopt a different, more rigorous attitude toward making sure employees perform at an expected level. Before, when people could be counted on to leave at 65, managers may have let underperformers coast if they have only a few years left before retirement, said Sauvé.

Now, to make sure people don’t outstay their ability to contribute, managers have to scrutinize employees’ output more consistently. They also need to be rigorous in monitoring performance across all age groups and all levels of seniority. Otherwise, they risk being accused of discrimination. “What that means is managers have to do performance management when it has to be done,” said Sauvé.

Even if sound management can remove the problem of poor performers, organizations still have to anticipate the question of what to do with the average performers who wish to keep working beyond 65.

You deal with this issue by setting up the pension plans and post-retirement benefits that “make it easy for people to go,” said Sauvé. “If you have a decent retirement plan, it’s easy to start talking to people about retirement.”

Because CAE cuts off life insurance at age 65, said Sauvé, “if somebody wants to keep going, they can, but the benefits are no longer there to support their continued presence in the organization. It becomes a ‘career decision’ for them. ‘Do I want to retire or do I want to keep working because I can’t stand being at home with my wife or husband all day long?’”

Sauvé noted that when Quebec passed the law to eliminate mandatory retirement, “we had the same fears and the same expectations that this would create problems. It just hasn’t been that way.”

Of the 2,800 people working at CAE, only four or five have remained beyond 65. Another four or five people have retired and come back on discrete contracts, said Sauvé.

What that means is retention remains a challenge, he added.

One HR job that can get quite complicated when people can no longer be expected to leave work at 65 is that of succession planning, said Kathler.

“Succession planning won’t be linear in a world where there are no clearly defined end points to someone’s career. People will have to be challenged in other ways. You can’t make anyone promises that they’ll be the next vice-president in 2014, because you won’t know if that spot’s going to be available,” said Kathler.

What this change entails is a lot more creativity on the part of organizations in the leadership development of rising stars.

“Organizations need to make sure they’re constantly developing a talent pool. Develop career plans so that people will develop their talent to the maximum, and continue to be challenged and continue to grow. So when there comes a time to replace someone, there will be a pool to draw from.”

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