Downside of extended retirement age

Age is just a number.

This seems to be the underlying principle of House Bill No. 3220, which seeks to remove the compulsory retirement age (of 65 years old) provision in the Labor Code.

The bill states that “an employee who reached the age of sixty five (65) years can choose to continue [his] employment provided that he qualifies under the bona fide occupational qualifications of his job. The burden to prove otherwise is with the employer.”

It aims to assist senior citizens who have been unable to set aside sufficient financial resources for their retirement in coping with the present high cost of living.

By way of background, when the Labor Code was enacted in 1974, age 65 was, based on actuarial studies at that time, considered the ideal age at which employees should retire from work.

It was believed that, health-wise, it was in their best interests to cease working at that age and enjoy their well-earned rest in the company of their loved ones.

The rule of thumb on mandatory retirement in most private companies is either 30 years of service or age 65, whichever comes first.

This arrangement is often spelled out in a collective bargaining agreement or, in its absence, in the employer’s retirement plan, which is made known to the employee beforehand.

In the latter case, the plan is prepared in accordance with the regulations of and registered with the Bureau of Internal Revenue so its beneficiaries would not be taxed on their retirement benefits.

Although the removal of compulsory retirement age may, on its face, look altruistic, it has a downside in the corporate world, in particular in medium and large companies, that cannot be ignored.

For young, ambitious and talented employees who want to climb the corporate ladder, the retirement period serves as a motivation or inspiration to perform their assigned tasks to the best of their ability.

They expect that when their superiors are served their retirement papers, they would be considered, if not be shoo-ins, to take over their positions. It’s like a carrot they look forward to getting when their bosses reach retirement age.

Every minute that compulsorily retireable executives stay on the job beyond the company-prescribed employment period represents moments of frustration and lost opportunity to those employees.

If they feel that the room at the top would remain closed for as long as its occupant is able to hold on to it, they cannot be faulted for seeking employment elsewhere where they believe their worth can be more amply rewarded or their managerial talents recognized.

In case this happens, all the expenses the company may have incurred in the local or foreign training of those employees would go down the drain and its fruits would instead be enjoyed by their new employer.

The provision in the bill that states that the employer has the burden in proving that an age-65 employee no longer meets bona fide qualifications for continued employment could be problematic.

It is common knowledge, and HR (human resources) personnel can attest to this, that most retireable employees would not, unless they are clearly physically incapacitated, admit to their inability to meet the requirements of the job or that it would be in their best interests to call it quits.

The pushback would either be because of personal pride or the fear that the loss of income would adversely affect the lifestyle that the employee may have been used to.

If no agreement is reached on whether or not the employee can still continue working after age 65 and the employer takes certain actions to force the issue, the disagreement could ripen to a labor dispute that would wind up in the Department of Labor and Employment.

That would not be a fitting end to the years of cordial and mutually beneficial relationship between the employee and the employer.

Retirement should be a happy occasion, not an event for silent recrimination. INQFor comments, please send your email to “[email protected].”