Warning to South Africans nearing retirement age

Even though most South Africans can only afford to retire at 80, employees nearing retirement age are at risk of being fired by their employers.

Cliffe Dekker Hofmeyr’s director of employment law, Phetheni Nkuna, explained to Daily Investor that if an employee has contractually agreed to retire at a specific age, then the employment relationship terminates upon the employee reaching that age.

“Section 187(2)(b) of the Labour Relations Act, 66 of 1995 (LRA) recognises that a dismissal based on age is fair if the employee has reached the agreed or normal retirement age,” Nkuna said.

However, if no retirement age was specified and the employer unilaterally imposes one and forces the employee to retire, that constitutes a dismissal.

“That said, the courts have held that when neither a normal or agreed retirement age can be established, that does not entitle an employee to remain an employee until they choose to resign,” she added.

For example, in Botha du Toit v Very & Partners, the Labour Court determined that 65 was the normal retirement age for the specific type of work in question. As a result, Botha’s dismissal at 65 was justified.

Nkuna explained that there are a number of reasons why a retirement age, either contractually agreed upon or specified (usually in a workplace policy) as the normal retirement age, is in place.

“From an operational perspective, it ensures workforce and succession planning. Retirement facilitates turnover, creating opportunities for younger employees in the market to advance in their careers,” she explained.

“As time passes, a person’s health may begin to decline, or their general efficiencies and productivity decline due to ageing.”

“This may often result in an employee simply not being able to cope with the pressures and demands of the workplace.”

Having a clear retirement policy helps avoid situations where employers may need to initiate incapacity proceedings if an older employee’s performance declines over time.

“Employers may also enforce retirement policies to ensure compliance with pension fund rules or collective agreements that stipulate specific retirement ages,” she said.

In South Africa, the problem with retirement age is that most people do not retire at the “normal” retirement age.

“Whilst it is common to provide for a retirement age under employment contracts or collective agreements for specific industries, many South Africans do not simply retire by the age of 60 or 65, as commonly believed,” Nkuna said.

“Some studies, such as a recent study by Sanlam, have shown that the real retirement in South Africa is closer to the age of 80.”

She said the main reasons for this are twofold.

Firstly, most South Africans cannot afford to retire comfortably at the age of 65 due to continued financial demands or responsibilities, which is common for a country with one of the highest levels of inequality.

The other reason is that skills shortages often compel employers to retain employees well beyond their retirement age without invoking their right to dismiss on this basis.

“The disconnect between policy and reality presents significant challenges for individuals, businesses, and the broader economy,” she said.

However, keeping an employee on beyond retirement age is a common cause of legal controversy, Nkuna explained.

“If the employer allows the employee to continue working beyond the retirement age, the employment relationship continues. The question then becomes whether an employer may invoke the retirement age.”

When this happens for an extended period, it may be argued that the employer has waived their right to rely on section 187(2)(b), which states that a dismissal based on age is fair if the employee has reached the normal or agreed upon retirement age.

“If an employer dismisses an employee without proving that they have reached the normal or agreed retirement age, the employee may challenge the dismissal under section 187(1)(f) of the LRA, which prohibits unfair discrimination based on age,” Nkuna said.

“If an employer allows an employee to continue working past retirement age and then dismisses them later, the employee may argue that the employer has waived their right to rely on section 187(2)(b). Furthermore, their subsequent dismissal is unfair.”

Additionally, even in cases where employees are dismissed because of their retirement age, the dismissal still has to be procedurally fair.

This means that employees may challenge the procedural fairness of their dismissal if they were not given reasonable notice or if the employer failed to follow proper procedures.

“Disputes related to retirement dismissals can be referred to the Commission for Conciliation, Mediation, and Arbitration (CCMA) or the Labour Court for resolution,” Nkuna said.