Merging Companies: Should We Set Retirement Age at 58 or 60 to Avoid Legal Issues?

One group company is being merged with the company to which I'm heading. The retirement age in that company was 58 years, while in my company it is 60 years. Should we fix it at 58 or 60 as a result of the merger? Will there be a legal issue if the retirement age is reduced from 60 to 58?

It all depends upon the terms of the merger. If the agreement of the merger states that the employees of the company that was merged into your company are governed by the service conditions of your company, then their retirement age will be 60 years.

Regards,
B. Saikumar
HR & labor law advisor
Mumbai

Thank you for the advice. As per the agreement, all the existing benefits of the employees of the merged company are to be secured. That means to them, keeping it at 58 wouldn't be objectionable. However, in order to bring uniformity in both units, we should either keep it at 58 or 60. An increase in the retirement age for the employees of the merged company would be favorable. Still, if we were to reduce it from 60 to 58 for our employees, there could be resistance. The Board is in favor of setting the retirement age at 58 years if there are no legal issues in reducing it. What should I do?

Please seek expert legal opinion before proposing anything to management. It will not only be a legal issue but also an industrial relations (IR) concern.

Thank you.

Regards

What I understand is that, as per the agreement of the merger, all the benefits previously admissible to the employees in the organization that was merged into yours need to be protected. This means you need to maintain the status quo regarding their benefits.

In this context, please let me know whether the terms of the merger agreement were accepted by the employees or the union. If accepted, you can retain their retirement age at 58 years, and they cannot agitate over this issue as you have not done anything that adversely affects their service conditions, and you have complied with the terms of the agreement which were accepted by them. If not, it is advisable to fix their retirement age at 60 years, on par with the employees of your company.

Regards,
B. S. Aikumar
Mumbai

I think Mr. Saikumar has dealt with the issue with the clarity it deserves. There are two companies that are merging. Employees of one company retire at the age of 60 years, and employees of the other company retire at 58 years. It is suggested that the benefit of retirement should go to the second company, where the retirement age was initially 58 years. If the retirement age is reduced from 60 years to 58 years without the consent of the employees of the first company, they will be at a disadvantage. Therefore, the advisable course of action would be to make the retirement age of the new company 60 years for all employees. This approach would help avoid any labor problems. Employees from the second company, who receive a bonus of two years in terms of retirement age, can be encouraged to give their best efforts to make the new company highly profitable.

Regards,
M.J. Subramanyam, Bangalore

Thank you to everyone for your valuable advice, which I received just in time as today was the last day for me to make a decision. I have settled on 60.

Regards,
Swami

Retirement Age Policy for Transferred Employees

Company A issued appointment letters to all its employees with a retirement age of 55 years in accordance with the existing company policy or as updated by the company policy from time to time. Subsequently, Company A began retiring employees at the age of 58. One department of Company A was separated to establish a new entity, Company B. Company B did not issue new appointment letters to the transferred employees from Company A but guaranteed continuity of service under the same terms and conditions as in Company A. In the appointment letters provided to new employees, Company B specified a retirement age of 58. Can Company B mandate employees transferred from Company A to retire at 55 based on the retirement age stated in their original appointment letters?

Please respond at your earliest convenience.

Thanks & Regards,
Harshada