Retirement Age Dilemma: Can Factories Have Different Policies for Senior and Junior Executives?

Can an organization under the Factories Act have two retirement age policies for senior and junior executives? Please assist; your help is appreciated.

Yes, you can have different retirement/superannuation policies for different categories of employees. This is because the Factories Act (like any other Act) is silent about retirement age. It is usually made a service condition either by separate mention in the appointment order or Standing Orders of the company.

Retirement Age Provisions in the Factories Act 1948

In the Factories Act 1948, there is no provision for retirement age. Retirement is mentioned in the Standing Orders. Does this establishment have its own certified Standing Orders, or is it following the Model SO prescribed under the rules? The Bombay IESO rules state that the age for retirement or superannuation of the workmen may be sixty years or such other age as may be agreed upon between the employer and the workmen by any agreement, settlement, or award which may be binding on the employer and the workmen under any law for the time being in force. So, check the factual position in this regard.

Different Retirement Ages for Different Employee Categories

There are instances where there is a different retirement age for different categories of employees in the same organization. For instance, if a few employees whose appointment order had specified a particular age to be the retirement age and later the organization had specified a different age, which is lower than the earlier one, the few employees governed by the earlier retirement age have the right to serve until they reach the enhanced age.

Thanks, Madhu & KK! I am working in a co-op credit society (Pathpedi) where the total manpower strength is 34 employees on payroll and 40 on a contract basis. I have never come across any standing orders, nor do the bylaws under the Maharashtra Co-op Credit Society Act specify multiple retirement ages. One employee has retired at the age of 60, and the rest are anxious to know whether they retire at 60 or 63.

Normally, Cooperative Societies will be governed by service rules attached to the State rules. As such, there cannot be different retirement ages for different persons, though there can be different conditions of service, including retirement ages for different classes/categories of employees, such as workers, Class III employees, or Officers of Junior Executives, Managers, and above, etc.

Common Retirement Age in Cooperative Societies
If the Cooperative Act and Rules framed therein provide for a common retirement age, that should be applicable to all employees. However, the Board of Directors may have powers to extend the retirement age of certain persons or keep employees even after superannuation on separate terms. This will be done after the benefits on retirement are settled.

Please check.

Dear Farhan Shamsi, Generally, employers specify a retirement age between 55 to 58 years. In some industrial establishments where the Industrial Establishments (Standing Orders) Act-1946 applies, employers can fix the age of retirement at 60 years or more. Therefore, you can create retirement/superannuation policies for different categories of employees.

Dear Alok, Thank you for your input. Our society has specified in its latest circular that the Managing Director and the Operations Manager will retire at the age of 63, while all others will retire at the age of 60. My point is, is it legally right to have two retirement policies? As of today, I have not come across any organization with two retirement policies.

Thank you.

Even the Central Government had two different retirement ages prior to the amendment of FR 56 in 1998. Prior to that, the general age of retirement had been 58 years. However, Group D employees could continue in service until the age of 60 years.

Please find the judgment regarding retirement age from the Karnataka Dharwad High Court bench.

Dear Shiva, Thank you for your assistance. However, that did not address my query. The situation involves having two different retirement ages in an organization of 40 employees, rather than adhering to a uniform retirement age policy for all. Thank you for your attention to this matter.

In a company with only 40 people, standing orders do not apply. The Shop & Establishment Act does not specify a retirement age.

Retirement Age Policies

You can have different age limits. In fact, you can give a different retirement age to each of your employees in your appointment letters if you wish (but please don't!). There is no legal restriction on age as such. In your employee manual, you can put what you want, as long as it is fair.

Challenges with Multiple Retirement Ages

However, having multiple ages of superannuation has its problems. For example, what happens when a person from a junior cadre moves to a senior cadre? Will they suddenly be forced to work three extra years? What if they don't agree and still want to retire at 60? You may face problems (IR and legal) in such cases.

Perhaps it's easier to have a single retirement age and then provide specific extensions to those who want it.

Thank you, Saswata, for your prompt help. Is there any way, being an HR of the organization, I can make the MD understand the importance of following a uniform retirement age policy? Two of our directors are labor law consultants, and they strongly advocate for two different retirement age policies as our succession rate at senior levels is very poor.