“Retirement is not the end of the road. It is the beginning of the open highway.” – Unknown
Sometimes we simply assume the obvious, don’t we? For example, that the legal retirement age in India is 58 years or in some cases 60 years. Correct? That’s quite incorrect actually. This is the time for a gasp and a thought, “I always believed that 60 years was a legal mandate, I wonder why?”.
Interestingly, in Indian jurisprudence, one of the unique features of employment law in India is that the law per se does not specify a retirement age. Pause and think for a minute: ever heard of the Retirement Act and Rules? Or some such? Yet, it is indirectly a mandate, and is very definitely enforceable in law, and has more to do with the Contracts Act (in the Private sector) and departmental rules (in the Public sector and Government).
Let’s take a deeper view: In the private sector, retirement age is typically specified in the contract of employment. While 60 years is common, it is by no means universal. We know of companies where retirement can be when you are as young as 55 years old, while in some others you could continue till the age of 65 (though this typically tends to be for board level appointments). Most private sector companies follow the retirement age of 60 years, which is in line with the government norms.
In the government and public sector, departmental rules and policies fix the retirement age. Usually, the retirement age is 60 years, as specified in the Central Civil Services (Pension) Rules, 1972. However, the retirement age may be different for employees of certain organizations, such as the judiciary, armed forces, and scientific institutions, where the age of retirement is higher than 60 years (and in the case of the Army, sometimes less as well).
Since these effectively form part of the contractual terms of appointment, they are enforceable in law and are hence legally valid. This is why, when employers want an employee or a class of employees to retire early, they typically need to enter into a negotiation and a formal document to vary the terms of the employment contract accordingly.
Of course, for unionised employees there are additional provisions of the Industrial Disputes Act (Section 9A – notice of Change), the Trade Unions Act and certain state level legislations (such as the MPIR Act and the MRTU & PULP Act in Madhya Pradesh and Maharashtra respectively) that make such discussions necessary. Under the Industrial Employment (Standing Orders) Act, 1946, the employer may specify the age of superannuation for the employees. Similarly, certain industries have their own laws governing the retirement age, such as the Factories Act, 1948, which specifies the retirement age of 58 years for employees working in factories.
Then, there are some other legislations that ipso facto (Latin for “by the fact itself.”) enforce a retirement age. The Income Tax Act has its own provisions that determine whether an account settlement is taxable or not, and typically, if the employee is withdrawing the entire balance prior to completion of a number of years of service, or before attaining a particular age, the entire corpus may become taxable. The PF Rules also specify at what age a full withdrawal is considered possible (age 60 years)
As a matter of comparison, in most western countries, specifying a retirement age is considered now to be discrimination on the basis of age. The typical official stance is that you can choose when you wish to retire – the employer may at best let you know that most employees of your grade/ role seek retirement at age, say 60 years. Nothing prevents you from continuing beyond, as long as the employer and employee are ok with the proposal!
Let us dive into the impact of adjustment in the retirement age. The impact of the extending retirement age in India can be both positive and negative: from the perspective of the older workforce, an opportunity to continue working and earning income for a longer period, especially beneficial for those who scant savings.
Also, as families become increasingly nuclear – with children studying and settling in various parts of India and abroad – and the corresponding change in traditional roles, employees do feel the need to continue in employment for not only financial but social reasons as well. Employers too benefit from retaining experienced skilled employees and avoiding the need for costly recruitment and training of new employees.
There are negative implications, as well, particularly for younger employees who have limited opportunities for employment due to fewer job openings or may have to wait longer to advance in their careers. It can also have an impact on the country’s unemployment rate, as older workers remaining in the workforce could reduce the number of job openings available for new job seekers. From the employers’ point of view, while skill levels are a plus, the possible implication on healthcare costs also needs to be considered. However, directionally, we will be heading to a situation where the retirement age concept gets modified to suit the times and the implications will need to be continually monitored.
(Steve Correa is an Executive Coach, OD Consultant & Author (The Indian Boss at Work)
Twitter: @SteveCorrea1122
Sameer Nagarajan is an HR professional with 35 years’ experience in HRM in India and overseas, currently based in Dubai)
