Pushing age-based retirement a "risky scenario"

Early conversations about retirement can benefit both employers and employees, but they require a high degree of sensitivity and caution.

Asked by HR Daily about the reported practice of professional services firms setting a retirement age for their partners, Henry Williams Lawyers executive lawyer Nick Noonan notes that such contractual provisions aren't necessarily unlawful.

An Australian Financial Review article accuses KPMG and EY of a "long-standing and widespread practice" of retiring partners on the basis of age, implying the firms engaged in unlawful age discrimination, but the reality is unlikely to be as "draconian" or as simple as the claims suggest.

Such clauses are not uncommon in partnership agreements at large, established accounting and law firms, and their existence doesn't mean they're relied on in the way their drafting might imply, Noonan says.

"KPMG [won't] necessarily tap someone on the shoulder when they hit the retirement age that's prescribed in the agreement and say, 'you're out of here' – [though] it might be the basis for a discussion about a managed exit."

Usually, there's a succession plan involved, which the partner is often part of, and when exiting an equity holding in a partnership they won't necessarily leave the organisation but rather their status might change – if they're a good performer, their employer's more likely to seek ways to keep them on in some capacity than to expel them from the partnership.

Further, because there are usually incentives – whether practical, financial or status-related – associated with making such a move, a mutually beneficial, mutually agreed exit plan is far more likely than a coerced exit, Noonan says.

If a partner were expelled from a partnership against their will because they'd reached a certain age, they could "certainly" accuse their employer of age discrimination, he says.

The firm's only defence would be to argue that the person was unable to carry out the inherent requirements of their job, but – particularly in a white-collar industry where manual tasks are not core duties – this would be difficult to sustain.

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