By Maeve Vickery, Head of Employment Law at Pardoes

The default retirement age is being abolished from 1 October 2011. So, what does this mean for employers and business?

One thing to be clear about is that it does not mean it will be unlawful to retire people at all, or that individuals can no longer retire at 65. The government’s intention is that, in most cases, the timing of retirement will become a matter of choice for the employee, rather than a matter of compulsion by the employer. There are some situations where compulsory retirement will be possible at a given age, but these will be limited. In practice, consensual retirement is likely to become the way forward for most businesses.

Employers have two options — to abandon fixed retirement ages altogether or retain a fixed retirement age if they can justify it. To do this an employer will need to be able to show that there is a real business need and that having the particular retirement age meets that need. The employer also needs to be able to show that a balancing act has been carried out, weighing up the discriminatory effect on the individual employee against the benefits achieved for the business, which includes considering whether the aim could be achieved by some other means.

A fixed retirement age is likely to be lawful in some situations, for example posts in the emergency services that require a significant level of physical fitness or other occupations requiring exceptional mental or physical fitness, such as air traffic controllers.

Before deciding to impose a fixed retirement age, an employer will have to have evidence that the retirement at a particular age is objectively justified. In one case concerning an air traffic controller, the employer could not provide evidence to support its contention that performance in relation to the specific skills required for the role declined after the cut-off age of 36 and, for that reason, lost the claim of age discrimination brought by a 50 year old who applied for a post.

Potentially, workforce planning could justify a fixed retirement age, although it is likely that Employment Tribunals will not be prepared to allow this without close scrutiny.

Practically, most employers are likely to opt for consensual retirement, which raises a number of issues.

Under the old regime, when a person was given notice of retirement, there was a statutory framework to enable an employee to request to work past their normal retirement age and hold these sorts of discussions with their employer. This statutory framework no longer exists and employers will need to develop their own processes for broaching questions about plans for retirement in a non-discriminatory way. Employers should not avoid these discussions for fear of allegations of discrimination, but they will need to be handled carefully.

Employers’ groups have expressed concerns that given changing population demographics and in the absence of a compulsory retirement age, managing an ageing workforce is likely to increase the number of employees with health problems and those who are protected by disability discrimination legislation. In the past, many employers have turned a blind eye to these sorts of issues because they knew that retirement was coming up in the not too distant future. In practice employers will now have to deal with performance and capability issues in the same way throughout their workforce — which is likely to involve some quite difficult discussions about people’s declining abilities.

At the same time the assumption that performance will inevitably decline with age must be avoided as this will inevitably lead to claims for age discrimination.

How should employers approach these issues and avoid claims? A sensible well thought out retirement policy will go a long way to convincing an Employment Tribunal that an employer is dealing with these matters properly, as long as the policy is put into practice and followed consistently.

Discussions as to where people see themselves in the future should be factored into the appraisal system over the entire workforce, so that questions about where people see themselves in one year or five years will not come as a surprise to older workers. Also, a retirement policy can give guidance on broaching these subjects with employees who are reaching what would have been their retirement age about their future plans. An employer is quite entitled to ask an employee about their plans for the short, medium and long term and if handled sensitively and consistently should help avoid potential claims for age discrimination and unfair dismissal.

It may be that a change of culture is needed in relation to appraisals and performance management across the whole organisation. Employers will need to be able to demonstrate that appraisals and performance management are applied consistently throughout the workforce. This will protect the employer from claims on the basis that older workers are being singled out. Workforce planning will take on even more importance. Conversations about aspirations and plans of all employees should be built into the appraisal system and become the norm. The expectation of younger workers with regard to promotion prospects may need to be adjusted if the retirement age in the organisation is removed altogether.

Things are changing both in the population as a whole and in the workplace, and employers will need to be alert to these changes, not only to avoid claims but to get the best out of their staff at whatever age.