As an HR professional, my natural inclination when people raise questions about pensions is to hide under the table and hope that no one notices me. Pensions are complicated and not really my area of expertise! However, sometimes pension issues bump into areas of HR practice and employment law that I’m much more confident about. Speaking to Practice Managers, reading forum posts and answering queries on Practice Index’s HR Help service has highlighted various questions related to the terms and conditions of staff who access their pension benefits whilst still employed.

Most of you will realise that I’m talking about ‘retire and return’ or ‘partial retirement’ offered by NHS pension schemes. If you’re unfamiliar with these, the basic definitions are as follows, but fuller information can be found within Practice Index’s Retire and re-join guidance.

An employee who is a long-term pension member, meets eligibility criteria and follows the correct process can resign their position, retire for a minimum of 24 hours and return to their previous job on a new contract. This is known as ‘retire and return’. From 1^st October 2023, some employees will be eligible for an alternative option known as ‘partial retirement’ where they can access some or all of their pension benefits after reducing their pensionable pay by 10%. This latter option doesn’t require the employee to resign; they simply renegotiate their existing contract.

Do employees utilising either scheme receive a new contract?

The short answer is yes. For ‘retire and return’, this means they receive a brand-new employment contract starting from their return date (see later in this blog for complexities around this…). For those taking partial retirement, they’ll need either an amended contract or a contract change letter that reflects whatever agreements have been made to reduce their pensionable pay by the required 10%.

So, their continuous service goes back to zero then, no matter how long they’ve been employed by the practice previously?

Errrr… no. This is where it gets complicated. First, let’s look at what ‘continuous service’ really means.

‘Continuous service’ is a tricky phrase that can mean different things depending on which aspect of the law is being discussed; it can even be defined in alternative ways depending on contract wording. Confused? Yep, you might well be.

All statutory employment rights related to continuous service (such as statutory notice and redundancy payments) are linked to a definition of continuous service given in the Employment Rights Act 1996 (ERA). Under this definition, continuous service starts when the person began employment with their current or, in the case of a relevant TUPE transfer, original employer.

But there’s a snag. The ERA says that under its definition, continuous service can only be broken by a gap in employment of at least seven days, running Sunday through to Saturday. Therefore, whilst NHS Pensions might be satisfied by a 24-hour break in service, there are many employment law purposes for which a short break like that isn’t recognised. The break in service is just ignored. Wow! Statutory notice and redundancy rights, for example, will therefore be based on the employee’s original start date.

In the context of non-statutory contract terms, such as any enhanced annual leave or sick pay provisions, the question of what ‘continuous service’ means is the sort of thing that lawyers can enjoy arguing over as it will usually depend on the exact wording of the contract. For example, many benefits for salaried GPs under the BMA model contract are based on ‘continuous NHS service’, which covers work for multiple NHS employers and allows for gaps of up to a year between them. Therefore, a salaried GP who takes a 24-hour retirement is still entitled to receive the same enhanced service-related benefits as they did previously because their statutory (ERA) continuous service and their NHS (contractual) continuous service are both unbroken.

So, if the employee is leaving the practice for less than seven days (Sun-Sat) in total, I should assume that their continuous service for most employment purposes remains the same as their original start date?

Yep, that’s the best thing to do. And this is especially true for those taking partial retirement, as they haven’t had any gap in employment whatsoever; they’ve just reduced their pensionable pay.

And to throw a last bit of complexity into the mix, some lawyers argue that even a seven-day gap won’t always break statutory (ERA) continuous service if there was an agreement when the employee resigned that they’d be returning soon anyway.

What if the employee is on sick pay or annual leave terms that the practice simply can’t afford? Can we not reduce these when the employee returns to work or reduces their pensionable pay?

Well, you can ask. But they don’t have to agree, and the majority won’t if given the choice. Would you?

There are other legal and ethical questions surrounding this issue. If your organisation has a habit of insisting that employees – who will always be within a certain age range – accept reduced contractual entitlements in order to access their pension benefits in line with pension scheme rules, this has a strong whiff of indirect age discrimination about it, which would be a breach of the Equality Act 2010. Age discrimination can be justified by the employer in some particular instances, but not on grounds of cost and finances alone. Beware!

If you’re genuinely unable to sustain practice finances without reducing the terms and conditions of long-serving employees (and I have huge sympathy for any practices in that position), you need to deal with this via full consultation with staff and seek to get their agreement to proposed changes. Don’t use ‘retire and return’ requests as a shortcut for this. It leaves your practice open to too many legal risks – and those legal risks could be very expensive.

What if the employee is a poor performer in general? Does the process of them requesting to access pension benefits make it any easier for me to exit them from the business?

Nope. Don’t even think about it! If you have a poor performer, use usual management procedures to deal with this fairly. It can be painful for everyone, I know, but it’s the right and ethical thing to do.

As previously mentioned, employees who take a contractual break of less than seven full days will keep their existing length of service for statutory employment law purposes, and that means they retain any rights to protection against unfair dismissal, as well as having protection against any potential discrimination relating to age. So, you can’t quickly dismiss them under probationary procedures after any rejoining of the practice. And whilst the legal aspects of refusing to allow someone to rejoin after their ‘resignation’ are a bit murky, it’s fair to assume that any tribunal would be firmly on the employee’s side if they’d been tricked by an employer into resigning their job under ‘retire and return’ rules without being offered it back afterwards.

In summary, my advice to GP practices is to keep pension matters separate from discussions about other benefits and management processes. Whether somebody is retiring and rejoining or just taking partial retirement, it’s best to keep any changes to their terms and conditions to a minimum, and always ensure the employee has agreed to them in advance. Those who have devoted years of their life to NHS service deserve this respect.

Susi O’Brien

Useful resources:

NHS Pensions Update – Live online course on Tuesday 17th October at 12.30pm