Workforce succession planning - Q&A with our employment law partner

There are many aspects to succession planning in businesses – whether it be the business owner’s or investor’s exit plans, how best to hand on the business in a will, or workforce planning.

Here we look at the last of these aspects – how to ensure that the lifeblood of new talent continues to move through your business and that blockages in career paths are avoided.

Q: We have several senior managers in their mid-sixties who’ve been with us for years. We have a problem with our younger staff moving on for better job prospects, but we’ve heard that we can’t force the older staff to retire. Is that true?

A: On the face of it, enforcing retirement at a particular age constitutes age discrimination. However that isn’t necessarily unlawful, if you can justify it. Strangely, your own business aims aren’t, of themselves, sufficient justification; the Supreme Court has said any justification must be by reference to national social policy aims such as ‘inter-generational fairness’ or ‘dignity’ (in terms of not having to ‘performance manage’ older workers out).  Other ‘social policy’ aims have also been identified by the courts.

Q: Does that mean our own circumstances aren’t relevant?

A: No, not at all – any justification you choose must also be relevant to your own situation. Your justification might be achieving a balanced and diverse workforce by increasing recruitment of young people. But if in fact this is not a problem for you, then you might not be able to rely on that aim. Similarly, avoiding the need to performance manage older workers may be a legitimate aim, but if in fact you already have sophisticated performance management measures in place (which generally is best practice), it may not be legitimate to avoid them for only one section of the workforce. What is appropriate in a professional firm might not be appropriate in a manufacturing company, and a smaller organisation might find it easier to justify a fixed retirement age than a large one.

Q: Is that all?

A: No. You also have to show that having a fixed retirement age is a proportionate way to achieve the aim you’ve identified, and actually does so. This isn’t as easy as you might think. A government study in 2010 found there was little evidence that banning mandatory retirement ages improved the employment opportunities of younger people, no clear link between the employment levels of older workers and younger workers, and no clear evidence that employing people for longer leads to increased costs for employers.

Q: I’m not so sure that we want to go ahead with having a fixed retirement age now! If we do, what does the law mean for us in practical terms?

A: You’ll need to be prepared to provide hard evidence to justify it. Keep a written record of your aims and what you considered along the way. If possible, collect evidence in the form of recruitment data, staff surveys etc, to show why having a fixed retirement age achieves your aims, and why your chosen retirement age is necessary. Would a higher retirement age have had the same effect?  Also, can you prove why the alternatives weren’t feasible e.g. using fitness or competence tests, rather than age, as retirement criteria?

Q: We are considering seconding one of our middle managers to a client for 6 months for career development purposes. What should we be thinking about from the legal perspective?

A: Have a written agreement with the secondment ‘host’ covering practical issues. Whose terms and benefits will the secondee be entitled to?  Does the secondee get the benefit of the host’s perks such as an on-site gym?  Who will deal with discipline and grievances?  Can you really do so if you are not ‘on the ground’?  Can the host insist that the secondee is disciplined, or terminate the secondment unilaterally?  How are the host’s confidential information, intellectual property and customer connections to be protected? Are you back-filling during the secondment?  When the secondee returns, will there be redundancy issues?

Q: One of our directors is going on maternity leave. We are considering having one of our managers ‘act up’ to the director position during her absence, which will also be good for his career development. Are there any legal pitfalls to this?

A: Again, think about the practical issues and have a written agreement with the employee. Will he get enhanced terms and benefits while acting up?  On what basis can the acting up be terminated early?  You probably want to stipulate that it can be terminated on notice with no specific reason required. If he is not actually being formally appointed a Companies House director, you’ll need to replicate fiduciary duties contractually. You might want stronger confidentiality and non-compete obligations, which may need to continue after the acting-up has ceased. Again, will there be any redundancy issues when the acting-up period ends?

Matthew Clayton heads up our Legal 500-rated employment team. He handles the full range of contentious and non-contentious employment law issues for a client base which includes multi-national companies, owner-managed businesses and not-for-profit organisations. A Cambridge graduate, his particular specialisms include complex staff restructurings and employment issues concerning business transfers. He is a member of the Employment Lawyers’ Association and a GL Ambassador for GFirst LEP.  

To talk to Matthew about your organisation’s succession planning employment needs, call 01242 514000 or email matthew.clayton@willans.co.uk.