By Paul Lewis
BBC Radio 4's Money Box
The Government has been warned that it could face legal challenges after it announced that redundancy pay will continue to vary with age, even after age discrimination at work is outlawed.
Patrick Grattan of the third Age Employment Network told Money Box on BBC Radio 4:
"The Government has decided to keep what seems to be an unlawful situation. I would certainly expect legal challenges. If I was 38 and had a mortgage and children and didn't get as much [redundancy payment] as someone of 42, I would challenge that as being age discrimination."
The Government's announcement this week that redundancy payments would continue to be higher for work done from the age of 41 surprised many commentators.
A Government paper issued last July said that "age discrimination in statutory redundancy payments should be removed as it cannot be objectively justified." And it proposed paying the same rate regardless of the person's age when it implemented European age discrimination laws later this year.
But after considering comments on its plans the Government decided to stick with the present rules. This week Trade and Industry Minister Gerry Sutcliffe told Parliament that older people find it harder than younger ones to find another job and so "retaining the age bands is permitted by the [European] Directive".
Under the age band rules someone made redundant gets one week's pay for each year's work under the age of 41 but one and half week's pay for each year's work from that age. Only pay up to £290 a week counts and there is a ceiling of twenty year's work when the sum is calculated.
So the maximum statutory redundancy payment is £8700 for someone in their sixties who is made redundant after twenty years' work, but around £3000 less if they are made redundant at 41 after the same length of employment. There is an even lower rate of half a week's pay for each year's before the age of 22. These rules will not now change on 1 October.
There has also been concern about the Government's plan to allow companies to force employees to retire once they reach 65. Earlier retirement ages will have to be raised from 1 October.
Freda Line from the Employers Forum on Age told Money Box that companies will have to adapt.
"All employers will have to move retirement age up to 65, unless they can justify it at a lower age, which is going to be an enormous change. There are an awful lot of employers in many sectors - banking, media, marketing, and advertising - who currently retire people much earlier than 65. We will see have to see a significant shift in employer behaviour."
Patrick Grattan says any retirement age is wrong.
"We've totally opposed this and again. It's another example of the Government caving in under very strong pressure. In fact many companies in this country and in others do not have fixed retirement ages. They are illegal in America where they have much higher employment rates among older people than in the UK. I think the retirement age of 65 will also be challenged."
BBC Radio 4's Money Box was broadcast on Saturday, 4 March, 2006, at 1204 GMT.
The programme will be repeated on Sunday, 5 March, 2006, at 2102 GMT.