We have reported on several occasions over the last few months that the government is planning to scrap the default retirement age at age 65 but doubts were expressed about whether the change would be implemented as forecast. Those doubts have now been resolved as a result of the government’s announcement on 13 January that employers will no longer be able to force staff to retire at 65 from this October. Employment relations minister Ed Davey said that it was “great news” for older people, businesses and the economy.
The change means that from 6 April employers will no longer be able to issue notifications for compulsory retirement at the age of 65 using the default retirement age procedure. The current regulations require such notifications to be issued and for the employer to discuss the proposed retirement with the employee. However, the retirement can be imposed by the employer even if the employee disagrees.
Only one third of employers still apply compulsory retirement at age 65 but many have expressed concern about loss of the opportunity to implement retirements without the risk of facing claims for unfair dismissal and age discrimination. Interviewed on Radio 4’s Today programme Mr Davey sought to allay those fears by saying that guidelines would be issued to reassure employers that they can still conduct performance appraisals and fairly dismiss staff who are no longer able to perform their duties effectively. Of course, that means that there is room for uncertainty about capability and whether the determination is really age related. There also remains a good deal of concern about how employers will in practice demonstrate that unlawful discrimination is being avoided by using a proportionate means to achieve a legitimate aim.
John Cridland, director general designate of the CBI has highlighted the concerns. He said:
“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.”
So what does the change mean in practice for employers?
- Employers must change their policies and procedures to remove those which rely on or refer to the default retirement age at 65.
- Employers who want to retain a retirement age will have to give careful consideration to how it can be objectively justified. In most cases a blanket policy will fall foul of this requirement.
- The “duty to consider” procedure needs to be phased out. From October this will play no part in arrangements for retirement.
- Any employers who wish to rely on the current arrangements must start the process on or before 6 April.
- Employers who wish to “retire” an employee will have to show a fair reason for dismissal.
- Consideration needs to be given to reviewing and if necessary amending arrangements for performance appraisals and taking appropriate action where necessary. Confining appraisals and any corresponding dismissals to those around the current default retirement age is likely to be regarded as discriminatory.
- There will inevitably be a significant increase in the number of employment tribunal claims resulting from the termination of employment of older employees.
As ever, our subscribers are more than welcome to contact us for advice and to make sure that all necessary changes are implemented in good time.