Pay

The TUC and CIPD advise that paying employees according to their age is directly discriminatory and, in most cases, unlawful (although there is an exemption concerning the National Minimum Wage (NMW) rates for young workers.

In addition, pay systems indirectly based on age, such as those which use length of service, could also be potentially indirectly age-discriminatory; although there is an exemption for pay and benefits linked to five years or less service.

Although long-service awards are indirectly age-discriminatory (as it is impossible for a young person to have had long service), they can be used in cases where the employer reasonably thinks they meet a business need. And there are good reasons why some employers use length of service to influence what they pay employees. It can encourage employees to stay with their employer longer, reducing labour turnover and recruitment costs, reward employee loyalty, and make employees feel valued. Length of service is assumed to be linked with increased competence.

However, it is important that employers can show that giving such awards actually helps to achieve their goals. To be able to demonstrate that long-service awards fulfil a business need, the employer would need to produce evidence to show this was actually the case.