Key Contact: Patrick Walshe – Partner
The Employment (Contractual Retirement Ages) Bill 2025 has now reached the Committee Stage of the Dáil. Once enacted, this legislation has the potential to significantly affect the ability of employers to compel staff to retire.
Retirement ages have been a controversial subject in recent years and there have been a number of successful court and WRC challenges where employees were able to demonstrate that attempts to compel them to retire constituted discrimination under the age ground in equality law.
At present, mandatory retirement is still possible. In 2024, the Supreme Court ruled that while employers can continue to set a mandatory retirement age, this must have the purpose of fulfilling a legitimate goal of that employer. Qualifying criteria include standardising retirement ages, ensuring intergenerational fairness for employment opportunities, health and safety, protecting the personal and professional dignity of employees, creating a balanced age structure in the workplace, and improving personal management by enabling efficient planning for the departure, recruitment and promotion of staff. Consideration must also be given to maintaining a consistent and coherent system of retirement, as well as to the financial impact on the relevant employees (including whether or not they will be entitled to an adequate pension). There is no requirement to assess employees on a case-by-case or role-by-role basis; employers are free to use a blanket mandatory retirement age, provided it fulfils these criteria.
The 2025 draft legislation implements recommendations made in the 2021 Report of the Commission on Pensions. That report noted growing unsustainability in the State Pension system in circumstances where average life expectancy continues to increase and birth rates continue to fall. Obviously this is a state of affairs that Ireland shares with the rest of Europe.
If enacted, the legislation will give teeth to the Commission’s report. It will apply to employees with a contract of employment specifying a retirement age less than the state pension age (currently set at 66). If such an employee does not wish to retire, they can write to their employer prior to the retirement date requesting to be allowed to continue their employment.
Critically, employers must, within only one month, then respond, explaining their reasons for the mandatory retirement age. This response must reasonably and objectively justify that this mandatory retirement age serves a legitimate aim, and that the means of achieving this legitimate aim are appropriate and necessary. If employers fail to do so, the employee could not be forced to retire until they reach the state pension age.
Employees who are dissatisfied will be able to refer their case to the Workplace Relations Commission for adjudication. An Adjudication Officer would then be able to award a maximum potential compensation sum of up to the greater figure of either €40,000 or 2 years’ salary.
These are obviously not insignificant sums and the new legislation could prove challenging for employers (especially large employers). However, the effect will be mitigated to an extent by the fact that the legislation will only be applicable to employees up to the age of 66.
That said, this is definitely a step in a new direction and, obviously, there is nothing to prevent a future Oireachtas increasing the age limit further (to 70, for example). As well as that, the new legislation is not going to exist in isolation. The WRC is planning to review its Code of Practice on Longer Working imminently.
In fact, we can no longer dismiss the possibility of mandatory retirement ages being abolished completely. By way of example, in 2024 the Joint Committee on Enterprise, Trade and Employment recommended abolition. This is a step that has been taken by a number of EU countries already (as well as further afield). Realistically, advances in medical science are only going to increase longevity.
In short, given the trend towards an aging population being projected to continue over the next three decades, adding increased strain on the State, Ireland will likely see continuing shifts in the area of mandatory retirement (as well as more broadly, in regard to requirements employers face concerning aging employees). The new legislation almost certainly signals the beginning of a shift change and employers should recognise this now, and begin to plan for it.
