By Max Clarke
Following the government’s announcement decision to scrap the default retirement age (DRA), a string of commentators have voiced contradictory views. While some have lauded the announcement, deeming it fair and 'common sense', others have raised concerns that it will lead to an increase in employment tribunals and unfair dismissal claims.
The change will mean that contracts of employment will have to remove all reference to a compulsory retirement age, and retirement policies will have to be overhauled not only to remove references to any normal retirement age but to provide an overview of an employer’s approach to retirement under the new rules. September 30 2011 will be the last date an employee can legitimately be compulsorily retired using the DRA.
Supporting the move is Charlie Mullins, entrepreneur and founder of Pimlico Plumbers, saying:
“Why would any sensible boss want to lose the loyalty, skill and experience of a capable worker whatever age they might be. Anyone that can do their job should stay on — pretty much common sense I would have thought?”
Rachel Dineley, age discrimination expert at national commercial law firm Beachcroft, however, anticipates that the move will cause practical problems for employers:
"There is a lot to consider and plan for if businesses and other organisations are going to manage a smooth transition to a new way of dealing with an ageing workforce. There are a good many positive steps that can be taken, but it will require a commitment and resources which some employers will struggle to give.
"The prospective cost to employers will vary considerably, depending on the nature of the organisation, age profile of its workforce and adequacy of pensions provision. In many cases it will lead to an increase in cost of both insurance benefits and redundancy compensation and there may also be a cost involved in making 'reasonable adjustments' when managing any potential disability issues.
Also anticipant of problems for employers, the CBI urged the government to delay the announcement until a more thorough consultation had been carried out.
Speaking today about the announcement, John Cridland, Director-General Designate of the CBI, said:
“The guidance for employers on working without the default retirement age is too little too late. The Government’s decision to scrap the DRA leaves businesses with a number of difficult practical issues.
“The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance. Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.
“Employers accept that more people will want to work beyond 65 as the population ages, but the Government has not recognised the fundamental question, which is how should employers manage retirement on the basis of a performance appraisal. This will be particularly acute in physically-demanding sectors.
“The majority of respondents to the Government’s consultation had concerns about the adequacy of existing employment law and about the timescale for the removal of the DRA. This evidence strongly supports the CBI’s concerns, but the Government has ignored these legitimate consultation findings.
Thomas Bourne, employment lawyer at national firm Bond Pearce stressed the importance for businesses to prepare for the changes now;
“Companies will have to beef-up their capability policies and performance review procedures so that any dip in output from older workers is easily and comprehensively measured and can be the subject of performance review in a dignified and managed way.
They will also need to give careful consideration as to whether a compulsory retirement age can be justified in the context of each role. This will be problematic especially before the courts start to interpret the new law as cases before them.”