Working Beyond Retirement Age: What the Law Says

Continuing to work for your employer past your retirement age may be beneficial to both parties: you earn a salary and avoid having to take a pension for longer, and your employer continues to benefit from your experience and expertise. However, you need to know the implications for you and your employer..

Importantly, if there is no set retirement age or you have an agreement that you can continue working after a stipulated age, your employer cannot then use age as a reason to terminate your employment. In other words, your employer would need to follow the dismissal process that applies to all its employees, with a valid reason for dismissal (such as operational downscaling), a fair notice period and a retrenchment benefit.

In their recent article “Navigating the retirement maze: Mechanisms of retirement implementation”, Nicolette van Vuuren, partner, and Caitlin Leahy, candidate attorney, at law firm Webber Wentzel, say there are two determinants of the age at which you must retire: your employment contract is likely to stipulate a retirement age (say, 65 years) and the rules of your company pension fund may state an age at which you must retire as an active, contributing member. This gives rise to four scenarios under which you may or may not continue working:

1. No pension fund rules apply and the age in years is stipulated in the employment contract: You must retire at the age stipulated unless you and your employer agree that you can continue working either under your existing contract or under a new fixed-term contract.

2. The age is stipulated only in the pension fund rules: Van Vuuren and Leahy say the employer must comply with these rules. “These may allow the employer to terminate your employment when you reach the normal retirement age as defined in the fund rules or, if the fund provides for a late retirement age, retain you until that later age,” they say.

3. The stipulated retirement age in the employment contract differs from that in the pension fund rules:

• If the contracted age is earlier than the fund age, the employer may apply the steps in point 1. (However, you will only become eligible for retirement benefits once you reach the retirement age specified in the fund rules.)

• If the contracted age is later than the fund age, the employer may, depending on the rules of the fund, follow the steps in point 2.

• If the fund permits early retirement, the employer may invoke the relevant provisions of the fund rules.

4. Neither the employment contract nor the fund rules stipulate a retirement age: In this case, you are not obliged to retire at a specific age.

Under point 4 or if there is an agreement to continue working after retirement age (point 1), the termination of employment based on age alone may constitute an automatically unfair dismissal under the Labour Relations Act, Van Vuuren and Leahy say. “This may result in an award of compensation of up to 24 months’ remuneration.”

Labour Court dismissal case

In the case Seokwane v Bidvest Prestige Cleaning Services (BPCS), heard by the Labour Court in late 2022, the court found that a worker was dismissed unfairly under these circumstances.

Rosie Seokwane had been employed as a sub-contracted cleaner to Volkswagen SA. When her employment agency lost the contract in 2019, she was re-employed by BPCS, at the request of VW SA, on a standard three-year fixed-term employment contract. She was already 62 years old, which was over BPCS’s stipulated retirement age of 60 years.

In 2021, as a result of downscaling at VW SA, Seokwane lost her job, being given one month’s notice of her “retirement” by BPCS.

The court found that the dismissal was “automatically unfair” and that Seokwane be awarded compensation of R58 324.

Commenting on the case, Deon Visagie, partner, and Jamie Jacobs, associate, at Webber Wentzel, said employers should ensure that they evaluate whether re-employing employees who have reached retirement age constitutes waiving of the employers’ rights associated with employees reaching retirement age.

“After doing so, employers cannot later rely on the stipulated retirement age as a reason to terminate their employment,” they said.