Health plans pose age discrimination minefield

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Employers are being urged to check health and benefit plans before the new age discrimination legislation comes into force on October 1.

Mercer Human Resource Consulting warns that companies which provide benefits like private medical cover, income protection and life insurance could be taken to an employment tribunal if they continue to use age-related rules in their policies.

John Matthews, Principal at Mercer, said: “The Government has been extremely unhelpful and left employers in the dark about how their health and benefit plans could contravene new age discrimination regulations. There are numerous areas where companies could trip up – the only way they can stave off potential claims is by conducting a thorough review of their benefit plans.”

Companies with flexible benefit arrangements are particularly at risk. Through these arrangements they tend to charge employees for benefits based on their age, or use some form of age banding.

For example, a 20 year-old will typically pay much less for life insurance through a flexible benefits scheme than, say, a 50 year-old. This may prove to be problematic under the new regulations, unless it can be objectively justified.

Income protection is another area where employers could be in danger of breaking the rules because it tends to be linked to pension scheme membership, which is frequently restricted by age.

While certain aspects of pension scheme arrangements are exempt from age discrimination rules, income protection plans are not. Therefore, companies may face claims if they refuse to provide income protection to employees because they are too young to join the occupational pension scheme.

“Companies need to anticipate what employment tribunals will consider to be discriminatory and look for potential trouble spots in their benefit provision. They may then need to adapt their policies or take out additional cover to protect themselves,” said Mr Matthews.

“Though it may be expensive for employers to take action to ensure their health plans are compliant, it will be far less costly than a string of damaging discrimination claims.”

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