Pros and the cons of increasing the retirement age to 60

Prime Minister Mahinda Rajapaksa in the Budget speech proposed to raise the retirement age for EPF to 60 years for men and women 

Friday, 27 November 2020

The Prime Minister in the Budget speech said: “It cannot be justified to have two different ages for compulsory retirement for men and women. The compulsory retirement age for the public sector is 60 years, whereas it is 50 years for the private sector. It is further lower for females. Contrary to this, life expectancy for females is 76.6 years and life expectancy for males is 72 years. Therefore, based on the life expectancy, it is proposed to amend the Employees’ Provident Fund Act to expand the retirement age for both men and women up to 60 years. I wish to also bring to your notice that at the time of the adoption of the Employees’ Provident Fund Act, life expectancy for females was as low as 57.5 years and life expectancy for males was 58.8 years.”

There is no law currently on retirement age contained in the EPF and ETF Acts. In the Gratuity Act the payment is made on cessation of employment if the employee has put in five years. This is available when the cessation of employment is for any cause. In the ETF Act at the end of a contract of employment an employee can withdraw his/her money in the fund, the only restriction is that you cannot withdraw your money except once every five years.

Generally in the private sector retirement is in accordance with the letter of appointment or a collective agreement if one applies. There is no discrimination and men and women usually are expected to retire at 55 and some companies at 60. Where an employee wishes to continue and where the employer has work for the employee, the employee usually is happy to retire to take his EPF and ETF benefits and work again on a contract, which again entitles him to EPF and ETF as before.

According to the Termination of Employment (Special Provisions) Act of 1971, as amended, if the letter of appointment or a collective agreement does not specify an age of retirement, to make this possible the Labour Commissioner has to give his approval . There is no law as such according to a labour law specialist that governs the retirement of private sector employees. 

Labour shortage

The shortage of labour in the factories is due to the fact that female employees wish to merely become eligible for gratuity and then take this money and go back to the villages. When they get married they also withdraw their EPF and ETF as well. Most female employees do not wish to remain till 60 years in the factories. Even now a female may work till 60 years and take her EPF at that age if the employer wishes to continue the employee till 60 years.

It may perhaps be correct that when a lower age was fixed for women to access their funds, it was assumed that the group of women who were kept in mind were the manual worker class and 50 was a reasonable age at which they could opt to retire and stay at home given the heavy nature of their work. However there was nothing in a contract of employment which made retirement at 50 compulsory for females and they could have continued if they wished.

Younger workers 

The pandemic should have by now encouraged the provision of flexible work hours for older workers. Therefore company structures need to evolve so that younger workers can get promotions while retaining older skilled employees. We cannot afford to have young people without jobs.  Extra income is also crucial to deal with healthcare, transport, living quarters and other essentials that become ever more expensive as people age. The proposal to increase the age to 60 must enable employers to retain the most productive employees until 60. But must also allow others to leave the employment early and withdraw funds once they reach the ages of female 50 and male at 55. 

It does not make business sense to keep unproductive employees until 60. The new opportunities should be extended to young employees given the technology trends. Therefore it is good to have the flexibility with provisions to any female/male employee to retire once they reach 50/55 and also to get extended up to five years for productive employees to work till 60 and enjoy higher retirement benefits.

Conclusion 

Increases in retirement age is a response to higher life expectancy. According to World Bank estimates, by 2030, one in every five Sri Lankans will be over the age of 60. In 2012, 13.2 million of the population were 15 to 59 years old. Of these, 7.6 million were economically active. But international research indicates that living longer does not necessarily mean more time spent in good health – and many findings also suggest that many people will find it challenging to work until the new retirement age. 

In several countries there are many flexible mutually-agreed arrangements for both public and private sector employees to work well beyond their retirement age based on their health and wellbeing, a practice which allows many experienced and skilled individuals to contribute more to their companies and country. There are many good examples in Sri Lanka also that we can adopt that provide flexibility both to the employee and employer over their talent management practices.