Doesn’t paying younger workers a lower wage count as age discrimination?

Some pay systems and employment-related benefits such as enhanced holiday entitlement or health insurance depend on length of service requirements that may discriminate against younger workers in particular.

The age regulations say that any benefit earned by five years service or less will be exempt. Employers may therefore use pay scales that reflect experience or limit the provision of non-pay benefits to those who have served a qualifying period, subject to the five year limit.

The use of length of service of more than five years for all types of employment benefits is lawful under the age regulations if:

• awarding or increasing the benefit is meant to reflect a higher level of experience of the employee, or to reward loyalty, or to increase or maintain the motivation of the employee; and
• the employer has reasonable grounds for concluding that using length of service in this way fulfils a business need of their undertaking.

The Government believes that the National Minimum Wage youth pay bands for 16 and 17 year olds and those aged 18-21 are permitted under the justification principles. Their conclusion is on the basis that paying younger workers the same rates as those over 21 would lead to more youth unemployment because employers would not employ younger workers so readily. The age regulations also have a specific exception allowing employers to have their own youth rates in certain circumstances. This exception means that:

• If you are a worker aged 16 or 17 or 18-21, your employer may not pay you less than one of your colleagues in the same NMW band as you.
• However, the employer may pay you above the statutory rate but less than a colleague in another NMW band as long as your rate is not more than the current statutory rate for those aged 22 and above (£5.73 per hour from October 2008).