Taking into consideration the current global economic scenario, it is not surprising that many organizations are now offering voluntary early retirement schemes and plans to their employees. However, not everyone can qualify for voluntary early retirement. And, whether you are the employee or employer, you should be knowledgeable about the legal issues regarding voluntary early retirement.
Just like any other retirement plan, even voluntary early retirement has an eligibility clause; that is an employee opting for this plan to put in a minimum number of years of service and/or be a minimum age. In addition, it is quite possible that the plan offered by one employer may actually stop benefits after the employee reaches a particular age.
Initially when voluntary early retirement plans were introduced, they were meant primarily for higher paid employees so that these employees could be replaced by other on a lower salary. However, this is not the case today and this mainly due to increasing cost of healthcare insurance.
Here are some legal issues regarding voluntary early retirement:
- No employee can be forced to retire early. If done, the US labor law will view it as a dismissal and not retirement.
- An employer is not obligated to pay notice pay or redundancy pay to the retiring employee. However, the employer at its discretion may offer some form of financial incentive to employees opting for voluntary early retirement.
- The payment of pension can be brought forward provided the pension plan allows this.
- Both employee and employer should be in agreement when it comes to voluntary early retirement.
- An employer can force a woman employee to retire at a different age from a male employee. The rules have to be the same for both genders.
- All payments being offered to employees opting for early retirement should be written down and a copy of the same should be handed over to the employees at the time of retirement so that they know what they will be entitled to.
- When offering voluntary early retirement, the employer should give sufficient time to employees to consider the offer and when the employee accepts it, it should be in writing.
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