Is It Legal to Retire at 55 When Pension Starts at 58? Seeking Advice on Superannuation Policy

Hi everybody, I work for an organization that comes under the Factory Act. The age of retirement for people up to a certain executive grade is 55, whereas staff belonging to the senior level retire at 58 years old. Interestingly, for other units across India, the age of retirement is 58 years for all categories of staff.

It is noteworthy that the company retires employees at 55, while the pension starts after the employee reaches 58 years of age. Moreover, they make you accept that it is not retirement but 'superannuation'—which literally means 'incapable of working due to old age'.

Please advise whether it is legal to retire at the age of 55. The staff welfare committee has already challenged the decision in a court of law. The matter is sub judice.

I would appreciate it if some input on the subject is given.

Thanks,
P. Roy

Age of Superannuation and Legal Considerations

Actually, the Factories Act or any other labor law does not prescribe the age of superannuation. It depends on the company policy mentioned in standing orders or appointment orders. Norms in similar industries will be considered in the adjudication of this case. 58 years is deemed reasonable.

Regards,
Varghese Mathew

Retirement Age and Its Implications

The age of retirement is stipulated either in standing orders, service rules, settlements, or letters of appointment. The age of retirement can be different for various units and classes of employees. This is a general principle. However, whether it is discriminatory or not depends upon the facts of each case.

Regards,
B. Saikumar
HR & Labour Law Advisor

As rightly mentioned above, there is no age limit for retirement mentioned in the Factories Act. It is specified in the Certified Standing Orders of the organization or in the terms of appointment or the Social Security policy of the organization. Generally, the age of superannuation is 60 years for both executives and non-executives, unless stated otherwise.

Good luck,

Regards

In every company, employees have to follow the terms and conditions as prescribed under the Standing Orders Act. These may be certified, or if not certified, then the provisions of the Model Standing Order Act should be followed. However, one must also adhere to the terms and conditions of the appointment letter. When determining the actual age of retirement, both the provisions of the Standing Order and the terms and conditions of the appointment should be taken into account. It can't be compared from industry to industry in private sector industries.

Regards

The matter being sub judice, nothing can be done at this time.

Retirement Age Discrepancy

The only thing I find really out of line is that the retirement age is 55, and the pension starts at 58. The pension should start immediately upon retirement. I do not think there is any difference in law between retirement and superannuation. They both mean the same thing.

Actually, the Factories Act does not state that an employee should be retired after reaching 55 years of age. It completely depends on the terms and conditions of the service agreement according to the nature of work. In some types of work, employees are advised to work up to the age of 58 years, while in other types of work, employees should not continue after reaching 55 years. Many organizations follow this practice to ensure proper output and reduce risks.

I agree with the views expressed by Sh. Raaj Gupta that the age of retirement varies from industry to industry in the private sector. Hence, it cannot be compared. Normally, there are the following three methods to fix the age of retirement:

(i) As per the company's policy
(ii) As per terms & conditions of the appointment/contract agreed between the parties
(iii) The age as mentioned in the certified standing orders of the establishment.

Section 12-A of the Industrial Employment (Standing Orders) Act, 1946 provides that if the Act is applicable to the establishment and until the standing orders are not certified, the Model Standing Orders shall be made applicable. The Schedule I-B has prescribed the Model standing orders on additional items applicable to all industries, which reads as follows:

"The age of retirement or superannuation of a workman shall be as may be agreed upon between the employer and the workman under an agreement or as specified in a settlement or award which is binding on both the workman and the employer. Where there is no such agreed age, retirement or superannuation shall be on completion of 58 years of age by the workman."

Thus, I find that the action of your company is irrational in retiring the employees at 55 years of age. The age of retirement has to be in consonance with the provisions prescribed under the Industrial Employment (Standing Orders) Act, 1946. The company is at liberty to frame different rules for senior-level officers who are not covered under the IE(SO) Act.

I think you have some misconception about "Superannuation" - which according to you means 'incapable of working due to old age.' On the other hand, superannuation is retirement on attaining the age of retirement in the normal course (i.e., while being in good health). The term "Retirement" covers all cases, including retirement prematurely due to injury and ill health. Compulsory retirement is made applicable to persons because of their misconduct/ill health, etc., and voluntary retirement is for reasons other than ill health, etc.

Since you have mentioned that the matter is sub judice and the staff welfare committee has already challenged the decision in the court of law, they can certainly take a plea that the age of retirement cannot be below what has been mentioned in the standing orders, whether certified or not.

Regards,
BS Kalsi
Member since Aug 2011

Distinguishing Between Retirement and Superannuation

Though the words 'retirement' and 'superannuation' are interchangeably used with reference to the service conditions of employees to mean the cessation of employment, a subtle distinction between the two expressions can be made. This distinction is based on the dictionary meanings and practices in industrial employment.

Superannuation refers to the age at which an employee is considered too old to continue in service. A company determines this age under a contract or agreement, considering the working conditions, relevant laws, and industry norms, customs, and practices. Thus, it relates to a stage (age) in the life of an employee where they are considered too old and deserve rest from work. An employee cannot superannuate before reaching that fixed age.

Whereas retirement means ceasing to be in service at any point in time or at any age, though such an age can also be fixed under a contract or agreement. It has no relationship with any criterion of debility supposedly caused by a particular stage in life. Thus, an employee can be retired on grounds of incompetence according to the company's policy even before reaching the age of superannuation, in which case it is called compulsory retirement. Similarly, an employee can be offered an option to retire earlier than the age of superannuation, known as voluntary retirement. However, you cannot compulsorily superannuate or ask someone to voluntarily superannuate. Thus, superannuation is an event, and retirement is the consequence of that event. Therefore, we often hear that Suresh retired from service upon reaching the age of superannuation.

This is only a humble attempt to distinguish between retirement and superannuation as I understand it, and it is only for academic interest.

Regards,
B. Saikumar
HR & Labour Law Advisor