It occasionally happens that employers wish to retain the services of certain employees once the employee has reached the normal or agreed retirement age – in order to retain certain specialized skills or for other reasons.
However, this can pose serious problems if not handled correctly.
Where an employee has continued working beyond the agreed or normal retirement age, and no agreement has been reached on the new retirement age, it seems according to case law that the employer would be entitled to retire the employee at any stage after passing the agreed or normal retirement age.
The employer must first consult with the employee about the proposed decision to retire him or her. The employee should have the opportunity to make representations before being given notice of retirement. The notice should also be reasonable.
In the case of Paul E Rogers and Exactocraft (Pty) (C1142/10)  ZALCCT 20:
The employee worked for the Respondent for 21 years. After reaching normal retirement age, he entered into a fixed term contract for two years, terminable on three months’ notice.
He was subsequently dismissed for operational requirements on three months’ notice. He claimed that the dismissal was not for a fair reason and not in accordance with a fair procedure as envisaged in S189 of the Labour Relations Act 66 of 1995 (LRA). He also claimed compensation for the unfair dismissal; severance pay in terms of section 41 and 84 of the Basic Conditions of Employment Act, 75 of 1997 (BCEA); and damages for short notice.
One of the principal questions that needed to be answered in this case is whether an employee who has retired and then entered into a new contract of employment with the same employer, is nevertheless entitled to severance pay in terms of section 41 and 84 of the BCEA.
In this case: “Steenkamp J referred to an article by Alan Rycroft who referred to a CCMA case, where the Commissioner held that where an employee reaches retirement age and decides to retire on full benefit, but continues to work thereafter, the retirement can be construed as a termination of the employee’s contract by effluxion of time and that the retirement does not constitute a dismissal. A decision to allow the employee to enter into a further employment contract therefore starts a new employment relationship. The period of service before retirement, the commissioner found, should not be taken into account when calculating employee’s severance pay…”
In a nutshell, employees wishing to enter into post-retirement contracts should be aware of the company policy governing this issue and they should understand fully what the terms and conditions will be, so as to avoid any misunderstandings, which will ultimately lead to further and unnecessary complications.
Remember, MISA is just a phone call away.