Length of service, youth pay rates and redundancy: age exceptions for AI pay tools in Great Britain

Pay and benefits software often rewards length of service, applies youth pay rates or calculates redundancy packages automatically. Because service and pay rates tend to track age, these rules can put younger or older workers at a disadvantage. In Great Britain, Part 2 of Schedule 9 to the Equality Act 2010 sets out specific exceptions where such differences are not an "age contravention". This page covers the main ones and what they mean for automated pay tools. For age filters in hiring and the general justification test, see age discrimination at work.

The short answer: an employer may give benefits based on length of service, but where the worker has more than 5 years' service it may rely on the exception only if it reasonably believes doing so fulfils a business need (Sch 9 para 10). It may pay young workers less than older workers where the minimum wage rate for their age is lower and their pay is below the single hourly rate (para 11). And it may enhance statutory redundancy pay in set ways, as long as everyone's amount is calculated on the same basis (para 13).

Benefits based on length of service

It is not an age contravention to put B at a disadvantage compared with C in providing a benefit, facility or service so far as the disadvantage is because B has a shorter period of service (para 10(1)). Points that matter for a pay or benefits engine:

• The 5-year line: if B's period of service exceeds 5 years, the employer may rely on the exception only if it reasonably believes that doing so fulfils a business need (para 10(2)). A tool that keeps adding service-based increments past 5 years needs that reasoning behind it.
• How service is measured: the employer chooses either the period worked at or above a level it reasonably regards as appropriate (assessed by the demands made on the person), or the period worked at any level (para 10(3)). It must be based on the number of weeks during the whole or part of which the person worked (para 10(4)).
• Absences: the employer may, so far as is reasonable, discount periods of absence and periods it reasonably regards as related to them (para 10(5)).
• Earlier employers: for the "any level" measure, periods that count as employment with the employer under section 218 of the Employment Rights Act 1996, or under an enactment that transferred the employment, are treated as work for the employer (para 10(6)).
• Not leaving benefits: the exception does not cover a benefit that may be provided only because a person stops working (para 10(7)).

Minimum wage age bands

It is not an age contravention to pay a young worker at a lower rate than an older worker if the national minimum wage hourly rate for the young worker's age is lower than for the older worker's age, and the young worker is paid below the single hourly rate (para 11(1)). The single hourly rate is the rate prescribed under section 1(3) of the National Minimum Wage Act 1998 (para 11(3)). So a payroll rule that pays a young worker less than an older colleague falls within this exception only while the young worker's pay stays below that single rate. For the rates themselves see AI and the minimum wage.

Enhanced redundancy pay

Statutory redundancy pay is calculated under section 162 of the Employment Rights Act 1996. Paragraph 13 lets an employer pay more than that without it being an age contravention (para 13):

• it may treat a week's pay as having no cap or a higher cap than the statutory one, multiply the amount for each year of employment by a figure above one, and multiply the total by a figure above one (para 13(5) and (6));
• different employees may receive different amounts if each is calculated on the same basis (para 13(1));
• it may give enhanced payments only to those entitled to a statutory redundancy payment, or who agree to leave in circumstances where they would have been entitled (para 13(2) and (3)).

A redundancy calculator that departs from the section 162 structure in other ways, for example by using its own age weighting, is outside this exception. See also redundancy pay.

Other age exceptions

• Apprentices: it is not an age contravention to pay an apprentice who does not qualify for the national minimum wage at a lower rate than an apprentice who does (para 12).
• Insurance: an employer may provide or arrange insurance or a related financial service for employees only up to, or only for those who have not reached, the greater of age 65 and state pension age, where it is provided under an arrangement with another person or by an employer whose business includes that kind of service (para 14). A benefits platform that stops cover at that age can rely on this; one that stops cover at an earlier age cannot.
• Child care: providing, arranging or helping with care for children of a particular age group, including paying some or all of the cost, is not by itself age discrimination in access to benefits. A child is a person under 17 (para 15).

Checklist for automated pay and benefits tools

• List every rule that uses age, date of birth or length of service.
• For service-based benefits, record how service is measured and, for anyone over 5 years, the business need relied on.
• Check that youth rates stop applying once pay reaches the single hourly rate.
• Check that enhanced redundancy formulas follow the section 162 structure and apply the same basis to everyone.
• Rules outside these exceptions are judged under the general age discrimination rules; see the Equality Act and AI at work.

This page covers Great Britain and is general information on the law as at 2 November 2026, not legal advice.