The default retirement age

The abolition of the default retirement age has serious implications for older members of staff, particularly those who have worked for an organisation for a long time.

by David Regan

7 April 2011

The question of how to deal with older members of staff in lieu of the abolition of the default retirement age (DRA) is a difficult one for managers. At present, employers must follow a fairly strict retirement process which penalises them for failing to comply, but which does allow them to choose to retire an employee without the employee having any say in the matter. With effect from 6 April 2011, this process will begin to fall away and, from 1 October 2011, it will be age discrimination to dismiss someone by reason of retirement.

Changes to retirement
The key changes to the law on retirement are as follows:
- Notices of intended retirement date cannot be issued from 
6 April 2011 onwards
- The DRA will be abolished with effect from 6th April 2011, although compulsory retirement will still be permitted in certain circumstances until 5th April 2012
- Employees will be able to request to carry on working using the current statutory procedure until 4th January 2012
- Any extensions as a result of such request must be less than six months and therefore must expire on 5 October 2012.

What does this mean for employers?
Notices of intended retirement can now only be issued for employees who are 65 or over (or will attain the company’s DRA, if different from 65) on or before 30 September 2011 and the notice of intended retirement date for that employee must be issued no later than 5 April 2011. The notice given can be up to 12 months, so can take effect up to 5 April 2012. Employees can then make a further request to carry on working provided that this is submitted no later than 4 January 2012. If a new retirement date is set as a result of this request, it must expire no later than 6 months following the previous intended retirement date if it is not to be discriminatory under s.13 of the Equality Act 2010 (although the defence of objective justification will still apply).

Alternatives to the DRA
1. Speak to the employee ‘off the record’ In brief, simply saying ‘this conversation is ‘off the record’, or ‘without prejudice’, does not mean that the employee cannot use the conversation against the employer. An employee could argue that these discussions are an attempt to force them out on the grounds of their age, and consequently sue for age discrimination
2. Speak to the employee ‘on the record’ The best time to do this is during annual appraisals, or at regular meetings. Indeed, it may make sense for employers to discuss future plans with all employees at appraisal time, as this will give the employer a better idea of who is looking for advancement, who is happy within their role, who is considering retiring, and plan accordingly
3. Keep a close eye on performance Many employers are concerned that the change in law means that they will be stuck with staff members who cannot perform and who cannot be retired. In fact, under the new law, employers will have to keep a closer eye on who is performing well, and manage all employees’ performance equally, regardless of age or length of service
4. Set a corporate normal retiring age Contrary to popular belief, employers will still be able to set a ‘normal retiring age’ for employees. Although this will be age discrimination, this will be justifiable if the decision can be shown to be a means of achieving a legitimate aim.

The most obvious difficulty for employers will be that there is no longer a ready-made timetable for retirement, meaning the path to senior positions could be blocked. Employers may also feel unable to ask when an employee is intending to retire, leading to ‘shock’ retirements that leave the employer without a proven successor.  

Employers may also find it difficult to start discussions about retirement with employees as detailed above. Even if they do, many employees may not take kindly to the idea that they should retire if they are not ready to do so. 

Moving forward, employers will be faced with the unpleasant task of performance managing long standing, cherished employees if they are not up to task rather than allowing them to continue with the knowledge that retirement is just around the corner.

Flexible Working
In practice some employers may be happy to allow an employee to continue working as long as they choose, and many employees will most likely want to at least reduce their hours, if not finish working completely, as they age. It is important to note that the abolition of the DRA has no effect upon the flexible working law which is currently in place, and employers will not be under a duty to allow older employees to work reduced hours unless they are eligible for flexible working in the usual way.

Exceptions
There are two exceptions to the abolition of the DRA:
1. It does not affect occupational pension schemes and the setting of a ‘normal retirement age’ for the purposes of occupational pension schemes
2. Employers may withdraw benefits for employees at or over the age of 65 (with the age at which withdrawal will be legal, rising in accordance with the state pension age).

Performance management
Managers must ensure that performance management processes are implemented fairly across the entire range of employees in order to avoid any accusations of age bias, or trying to force out the older members of staff. In addition, managers will need to watch for age related disabilities and, if any disability is found, will need to consider whether or not any reasonable adjustments may need to be made in relation to the employee and their employment.

David Regan is a solicitor in the employment team at Mundays Solicitors