26th January 2011

Managing without the Default Retirement Age

The Government has confirmed that the Default Retirement Age (DRA) will be phased out this year.  Currently employers are able to retire staff who reach the age of 65 by giving between 6 and 12 months’ notice before they reach their 65th birthday.  Employees have a right to request to stay on.  If exercised, this is dealt with at a face to face meeting followed by the employer’s decision in writing.  There is also a right to appeal which is dealt with in the same way.  So, although employers have to tick all of the boxes, the current process provides certainty for staff planning.

Transitional Arrangements

The DRA is being phased out over a transitional period running until 1 October this year.    The last day that an employee can be compulsory retired is 30 September 2011.  This means that employers can only use the current process with employees who turn 65 on or before 30 September 2011.  The last day that an employer can give 6 months’ notice is 30 March 2011.  The Government recognises that some employers may already have given staff notice of retirement and has confirmed that any notice which specifies a retirement date after 30 September 2011 will be invalid.  This flowchart sets out the transitional arrangements.

Post 1 October 2011

Employees will still be able to retire after 1 October 2011 but employers will only be able to force employees to retire at a set age if it can be objectively justified.  If choosing to set a compulsory retirement age, employers will need to be able to show that in doing so they are responding proportionately to a legitimate aim.  Some industries will find this easier than others, such as those whose employees require high levels of physical fitness.  Whilst ACAS has published guidance on the subject (Working without the DRA, January 2011), it does not give clear guidance to employers looking to set a compulsory retirement age.

With employees having the right to continue working after they reach state pension age, employers have raised concerns that insurers will raise the costs of group risk insured benefits (such as income protection, sickness and accident insurance as well as private medical insurance).  The Government has confirmed, however, that employers may withdraw these benefits for staff who continue working past state pension age.

Implications for Employees

The removal of the DRA does not mean that employees can no longer retire, it just means that their employer cannot force them to retire once they reach a certain age.  Older employees can still voluntarily retire when they choose and draw any retirement benefits they are entitled to in line with pension scheme rules.

Implications for Employers

The removal of the DRA is an opportunity for employers to review their practices for managing employees and their performance.  Without the DRA, employers have one less fair reason to dismiss.  The potentially fair reasons they are left with include capability/ability, conduct and ‘some other substantial reason’.  Performance or conduct concerns, whether or not they may be grounds for dismissal, should be addressed by discussion within the workplace.

Older employees may be more prone to impairments.  If an impairment amounts to a disability, the employer is required to make reasonable adjustments to remove any barriers to their performance, regardless of the age of the employee concerned.  Employers must also be careful not to neglect to address performance or conduct issues with older staff because, or in the expectation that, they will be retiring soon.  Any such issues must be addressed consistently regardless of the age of the employee concerned.  Failing to address performance or conduct issues with older staff will make matters difficult and may well be discriminatory.

Sarah Winter
Senior Solicitor

Post 1 October 2011

Employees will still be able to retire after 1 October 2011 but employers will only be able to force employees to retire at a set age if it can be objectively justified.  If choosing to set a compulsory retirement age, employers will need to be able to show that in doing so they are responding proportionately to a legitimate aim.  Some industries will find this easier than others, such as those whose employees require high levels of physical fitness.  Whilst ACAS has published guidance on the subject (Working without the DRA, January 2011), it does not give clear guidance to employers looking to set a compulsory retirement age.

With employees having the right to continue working after they reach state pension age, employers have raised concerns that insurers will raise the costs of group risk insured benefits (such as income protection, sickness and accident insurance as well as private medical insurance).  The Government has confirmed, however, that employers may withdraw these benefits for staff who continue working past state pension age.

Implications for Employees

The removal of the DRA does not mean that employees can no longer retire, it just means that their employer cannot force them to retire once they reach a certain age.  Older employees can still voluntarily retire when they choose and draw any retirement benefits they are entitled to in line with pension scheme rules.

Implications for Employers

The removal of the DRA is an opportunity for employers to review their practices for managing employees and their performance.  Without the DRA, employers have one less fair reason to dismiss.  The potentially fair reasons they are left with include capability/ability, conduct and ‘some other substantial reason’.  Performance or conduct concerns, whether or not they may be grounds for dismissal, should be addressed by discussion within the workplace.

Older employees may be more prone to impairments.  If an impairment amounts to a disability, the employer is required to make reasonable adjustments to remove any barriers to their performance, regardless of the age of the employee concerned.  Employers must also be careful not to neglect to address performance or conduct issues with older staff because, or in the expectation that, they will be retiring soon.  Any such issues must be addressed consistently regardless of the age of the employee concerned.  Failing to address performance or conduct issues with older staff will make matters difficult and may well be discriminatory.

Sarah Winter

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