UK faces issues of age discrimination

The UK government is due to introduce the European Union's age discrimination legislation in October 2006, giving investment banks 15 months to put their houses in order.

They have plenty to do. A recent survey by law firm Allen & Overy found a substantial minority of big financial services employers used age to select staff for redundancy and that about 90% specified a minimum number of years' experience as a selection criterion in job advertisements.

At a seminar on age discrimination held last month by search firm Sheffield Haworth, Julie Quinn, a partner in Allen & Overy's employment law division, told investment bankers that this would no longer be possible when the law changes. The proposed legislation covered discrimination in recruitment, promotion and training, pay and benefits, redundancy, retirement and unfair dismissal rights. Quinn said: "It's pretty much the entire employment relationship."

She added that banks would need to redesign job specifications to indicate areas of expertise instead of years of experience; they would have to make training programmes equally accessible to older staff, and to promote graduate recruitment programmes to mature applicants as well as "twentysomethings". They would also need to give consideration to employees' requests to work beyond the age of 65.

Quinn advised banks to build an age profile of their employees in different business divisions as part of their preparation. She said: "Unless you know where you have particular pockets [without older employees], you won't be able to target areas ripe for a claim."

Allen & Overy's research suggests that fewer than a quarter of banks track the ages of employees. Unsurprisingly, therefore, banks are unable to provide an official average age for their employees when asked. Unofficially, however, they had a clearer conception of the reality: the average age of banking employees is about 32.

Banks said they were making preparations for the new legislation. The European head of diversity at a bulge-bracket bank said it was reviewing its internal procedures and was considering targeting mature students at London's South Bank and Westminster universities for its graduate recruitment programme. Abbas Jaffer, head of diversity at Morgan Stanley in Europe, said the bank was initiating its plans next month.

Privately, banks admit they have a long way to go. "The financial services industry is institutionally ageist: I've hired one person over 50 in the past three years," said a banking recruiter. She said the problem was rooted in the perception that people who are any good in front-office roles will have retired by their mid-40s. Clients encouraged ageism, said another: in some cases they expected to deal with young people, who were considered more dynamic.

There is substantive evidence that older investment banking employees were more likely to be selected for redundancy after the late 1990s. Research by Penna, a City of London-focused outplacement provider, showed that the average age of bankers made redundant in the late 1990s was 45. This fell to 34 when banks began to make widespread redundancies in 2001.

The financial consequences of failing to comply with the new legislation should focus employers' attention on the issue. Like payouts for sex discrimination and discrimination on the basis of ethnicity, damages for age discrimination will be unlimited.

A trader on a multi-million annual pay package, who successfully argues age discrimination after being dismissed at 45, could demand substantial compensation for loss of earnings during the remainder of his or her working life.

Anti-ageism discrimination exists in the US. In 2002 Sharon Haugh, former chairman of the North American division of Schroders, brought a multi-million dollar claim against the fund manager, alleging she was dismissed because of her age.

If winning awards is anything to go by, banks have gone some way to tackling other forms of discrimination. In the past four years Citigroup, CSFB and JP Morgan have won accolades from Opportunity Now, an organisation promoting women in the workplace. Last month, CSFB, Goldman Sachs, Lehman Brothers and HSBC received awards from Race for Opportunity, which promotes ethnic diversity in the UK.

Nearly 200 companies paid 2,000 (€3,000) to join Race for Opportunity and were benchmarked for their focus on ethnic minorities in terms of recruitment, selection, progression and retention as well as their work with small businesses. Lehman has appointed a race champion in the form of Chris Patrick, a black managing director in its mortgage capital division. Fleur Bothwick, head of diversity at the bank, said it was also using smaller suppliers while asking its larger ones to promote diversity.

Diversity managers said the new age discrimination legislation was likely to be quantitatively and qualitatively different. Ethnic minorities are minorities but potential age discrimination claimants are in the majority: unlike US age discrimination legislation, which applies only to people aged over 40, the UK's law will cover young and old employees.

Diversity managers said it would require a rethink of issues such as experience, cumulative rewards for length of service, and age limits on pension schemes.

Jaffer said: "Age is the next big challenge facing employers. The impact of legislation is going to be massive."