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 in particular.
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 under the age regulations if:
- awarding or increasing the benefit is meant to reflect the higher level of experience of an employee, 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 (meaning their company or 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 under these principles. 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.