Some pay systems and employment-related benefits, such as enhanced holiday entitlement or health insurance, depend on length of service requirements which may discriminate against younger workers (as well as against women, who are more likely to have breaks in their service to care for dependents).
The Equality Act 2010 states that any benefit earned by five years' service or less is exempt from the laws prohibiting age discrimination. 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 this five-year limit.
The use of length of service criteria lasting longer than five years for all types of employment benefits is lawful if:
- the benefit is meant to reflect greater experience, to reward loyalty, or to increase or maintain motivation; and
- the employer has reasonable grounds for concluding that using length of service in this way fulfils a business need of their organisation.
The government believes that the National Minimum Wage (NMW) youth pay bands for 16- and 17-year-olds and those aged 18 to 20 are justified. They have concluded that paying younger workers the same rates as older workers would lead to more youth unemployment, because employers would not take on younger workers so readily. For this reason, the Equality Act contains a specific exception allowing employers apply those lower rates.
In April 2016, an additional age bracket and wage rate was added for workers aged 25 and older.