Employer Resources Newsletter - June 2024

Adare’s most recent HR Barometer Series 8.1 included one remarkable figure that highlights the high price organisations pay to replace employees. 

The research found that the average cost of replacing an employee in 2024 is €9,461, up over €2,000 from €7,321 in April 2022. The average cost of replacing an employee in a small sized organisation is €8,015 increasing to €10,092 for medium-sized organisations posing significant challenges for nonprofit organisations as a budget item. 

Aggravating Labour Market Conditions 

With a skills shortage and persistent tight labour market conditions, organisations remain under pressure to increase pay and benefits to retain talented employees. The external labour market forces also have another unwanted side effect as employees may face an increased workload while vacancies remain open. If this situation persists, increased workloads can amplify the risk of more employees seeking alternative employment and further exacerbate any turnover issues that might exist. With relevant skills still relatively scarce in many sectors, including those in the nonprofit sector, high recruitment costs and ongoing challenges around replacing employees promptly, will result in organisations continuing to face a short to medium-term struggle to retain talented employees and keep employee turnover levels as low as possible.

With an expected employee turnover rate of 12% for the full year in 2024, the cost of simply replacing employees could amount to a large annual budgetary item. These increased financial costs are accompanied by time and management costs as leadership teams and HR departments devote more time to talent acquisition at the expense of achieving greater progress in other areas of priority for strategic HR.

How Can Employers Rise to the Challenge

The figures highlight the importance of taking a proactive approach to employee retention and engagement. While there may be an initial cost in developing effective HR strategies in these areas, improving employee retention and attracting new talent can result in substantial cost savings for an Organisation over time. 

The causes of high employee turnover will vary from organisation to organisation, but the following non-exhaustive list of approaches to tackling high levels of employee turnover are commonly applicable:

• Understand Why Employees Leave

When an employee leaves, record what their reasons for leaving were. If you notice a trend developing, take action to ensure you minimise the risk of more employees leaving for the same reason. The most common reasons for employee resignations cited by organisations surveyed this year were pay (57%), career progression (43%) and location change/travel (37%).

• Employee-centric HR Initiatives

The HR Barometer also revealed that the percentage of employees leaving for a higher remuneration package decreased from 66% in 2022 to 57% in 2023. This suggests employees may be placing less emphasis on pay as the primary motivator for changing job. For organisations, the response could be to adopt a more holistic view of employee satisfaction. By understanding the reasons behind employee turnover and strategically addressing them through tailored HR initiatives that begin upon induction and continue beyond offboarding, employers can develop a more proactive and employee-centric HR management strategy. This approach helps to cultivate a more engaged, loyal, and productive workforce.

• Make Work Life Balance Work 

Despite the recent introduction of new statutory employee rights around requesting remote and flexible work, many organisations are still struggling to implement these working practices effectively. Although held out as a benefit that can strengthen the employment relationship, many organisations are experiencing difficulties in the areas of retention, engagement and culture if their hybrid, flexible or remote working practices do not align with employee expectations. It seems certain that the future of work will continue to be flexible and organisations that can effectively address the human aspects of remote and hybrid work, like team connection and engagement, will be best positioned to attract and retain talent and achieve long-term success.

If you require advice, guidance, or implementation support of strategic HR initiatives please contact any of the Adare team at (01) 561 3594 or email info@adarehrm.ie for more information on how we can help and support your Organisation under our Strategic Continuum Programme.

Employer ordered to Reinstate Employee Following Mandatory Retirement

Background

The complainant commenced employment with the respondent in September 2019. He worked as a Desk Support Agent on a salary of €35,000 a year. 

Summary of the Complainant’s Case:

At the time that the complainant entered employment, the respondent was carrying out a review of its pension schemes and proposals to align the retirement age to the age of 65. This change was notified to all staff in April 2020 and came into effect in July 2020. The complainant was due to turn 65 in July 2023. In January 2023, he was notified of his upcoming retirement after which he made a formal request to work past the age of 65. The complainant met with his line manager and a member of HR to review this request, which was subsequently denied. After an appeal meeting, a final decision was issued to the complainant in April 2023 upholding the original decision not to extend the retirement age. The complainant complained that he had been discriminated against by the respondent contrary to the Employment Equality Act 1998 (“EEA”) when he was mandatorily retired. 

Summary of the Respondent’s Case:

The respondent submitted that the following were legitimate and objective justifications for its mandatory retirement age: the need to promote intergenerational fairness, the necessity for effective succession planning, and the importance of maintaining age balance in the workforce to uphold the individual dignity of an employee. 

Findings

Section 85A EEA provides that the complainant must establish facts which raise an inference of discrimination, after which the respondent must prove that there was no discrimination. A mandatory retirement age raises an inference of discrimination. The Adjudicator considered whether the respondent had put forward an objective justification for the mandatory retirement age of 65. 

The Adjudicator noted that when examining the matter of intergenerational fairness and the associated need to safeguard career pathways while preserving skills and knowledge, the context of this complaint was that the complainant held a junior role and it was unlikely that retaining him in employment would have impeded the career progression of any other employee. 

Further, the Adjudicator held that succession plans would not have been affected and a potential cliff-edge scenario (where a substantial number of employees might retire simultaneously) would not have arisen if the complainant was retained in his employment, having regard to the small and non-strategic IT department in which the complainant worked, coupled with the non-critical nature of the role he was fulfilling in the respondent. 

Conclusion

The Adjudicator acknowledged the legitimacy of the respondent's health and safety concerns for 85% of the workforce engaged in field-based activities. However, he highlighted that such concerns did not apply to the complainant, as his role was entirely desk-based. Accordingly, the Adjudicator held that the decision of the respondent to refuse to allow the complainant to work beyond the age of 65 was not objectively justified on any of the grounds set out in the retirement policy, given his specific role. He found that there was “a lack of demonstrated scrutiny regarding the compatibility of the stated legitimate aims of the respondent in the instant case with the specific characteristics of the complainant”. 

The Adjudicator also had regard to the Code of Practice on Longer Working and the suggestion that employers need to consider the “changing statutory and legal framework in regard to retirement and pension entitlements”. The Adjudicator noted the complainant’s limited skillset, the fact that he was still seeking work, and that his only income was derived from social welfare payments, which amounted to less than 40% of his earnings in the respondent. 

The Adjudicator held that there was no evidence that the respondent had considered the complainant’s future job prospects and the anticipated reduction in his income when deciding to terminate his employment. 

Decision

In deciding on redress, the Adjudicator accepted that the complainant had been actively engaged in seeking employment but had been unable to find work. He also held that it was clear that there was an excellent relationship between the parties during the complainant’s employment and that he was a much-valued employee. Therefore, the Adjudicator ordered that the complainant be re-instated in his previous role with effect from the date of his retirement.

Our Commentary:

The Equality (Miscellaneous Provisions) Act 2015 amended the rules on mandatory retirement and age discrimination, making mandatory retirement ages objectively justifiable by employers. This has been supplemented by the Industrial Relations Act 1990 (Code of Practice on Longer Working) (Declaration) Order 2017. This Code of Practice aims to guide employers, employees and their representatives on the best practice in the run-up to retirement, including responding to requests to work beyond the retirement age in the employment concerned.

While there is no prohibition on employers setting a certain age at which employees must retire, the enactment of the Equality (Miscellaneous Provisions) Act, 2015, means that while the right still exists, it is now only permitted if it is, (a) is objectively and reasonably justified by a legitimate aim and (b) the means of achieving that aim are appropriate and necessary. In this case the respondent employer had sought to justify the mandatory retirement for a variety of reasons. However, even if the contract does contain an enabling clause or there is a policy in place, this does not mean that the employer has a unilateral right to enforce retirement against the employee’s will and should after an application to remain working beyond the retirement age is made, consider each request on its own merits and abide by the procedures laid out in the Code of Practice.

Revenue Commissioners Guidance on Supreme Court Employment Status Decision 

Revenue is expected to publish an updated Code of Practice on Determining Employment Status in the coming weeks. The Code of Practice is undergoing a review by Revenue, the Department of Social Protection and the Workplace Relations Commission to reflect the Supreme Court’s judgment in Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza.

In the Karshan case, the Supreme Court upheld a Revenue appeal, and found that delivery drivers working for Karshan (Midlands) Ltd, trading as Domino’s Pizza, were employees, rather than independent contractors for income tax purposes. 

It should be noted that there has been no change in the law on foot of the Supreme Court’s judgment. Once the updated Code of Practice is published however, there is likely to be more focus on compliance in the area of determination of employment status.

Once the guidelines on the impact of the judgment are clarified, organisations that engage self-employed contractors should review their employment arrangements to ensure they remain compliant.