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Retirement age issues

You can keep up to speed with retirement age changes in the UK on our blog
For help in relation to a specific query on 0161 618 1032 or click here

Default Retirement age – the latest

Does the UK still need an employment retirement age? Should there be an age where an employer can insist that an employee step down and leave the business? Or should your employees have the right to go on working and should they be the ones to decide when they will go? Opinions vary. However, new regulations have now been implemented that abolished the default employment retirement age for employees. This will cause a major sea change in the way that older employees are managed.

What is the new position?

The current “default” retirement provisions have been removed. This means that employers who decide to “enforce” a retirement age, and terminate employment on the grounds of retirement will have to provide evidence of justification of such actions or face successful claims of age discrimination and unfair dismissal. This will be so even if organisations have an “accepted” retirement age and even if contracts of employment provide for retirement.

What if I have older workers and still wish them to retire when I say so?

This will no longer possible without risking expensive employment law claims – see above, unless you can justify continuing to have a particular retirement age.

Surely a definite retirement age gives employees a goal to work to so that everyone knows where they stand?

That is one view. However, in its consultation, the Government identified a body of opinion that was of the view that having a default retirement age was unfair and that individuals and not their employers should be the ones to decide when to go. There is nothing in the new law to prevent employees willingly leaving at a particular age – however from 6th April 2011 the employer will not be able to enforce it.

Will I be able to justify continuing to have a fixed retirement age?

This is likely to be very difficult. The law says that an employer must demonstrate, if challenged, that the reasons for keeping the retirement age are a “proportionate means of achieving a legitimate aim”. Therefore there are two hurdles. The employer must point to a legitimate aim. This could be on the grounds of succession planning (creating opportunities for younger workers in your organisation), or performance management (on the basis that you can argue that performance begins to decline at your chosen retirement age). The employer will need to have written evidence that this legitimate aim is actually served by continuing to have a fixed retirement age.

Secondly, the employer will need to show that it is “proportionate” ie in broad terms having a fixed retirement age was a proportionate response to the problem. This involves showing that you have balanced up the discriminatory effect of potentially terminating employment against the employee’s wishes with the need to achieve the legitimate aim(s). It is difficult to predict how the Employment Tribunals and Courts will react to this. Relevant factors will include:

• The size of the employer
• Whether the fixed retirement age has the backing of any trade union or was backed by the majority of employees during a consultation exercise
• Whether the employee was provided with other options eg a flexible retirement option
• Was a pension made available (to offset any financial hardship)
• Can the employer show evidence to back up its legitimate aim, eg evidence that career progression for younger employees will be badly affected, evidence as to why the continued employment of over 65s would in some way impact adversely on the business etc.

What employers should do now – how to guard against retirement age related discrimination claims

1. Consider now how this will affect your business. Will you have employees who you would normally expect to retire in the coming years? What will the stance of your business be? Are you content to let employees continue to work (potentially until they are 70 plus or until they wish to leave)? What would the effect of an increasing retirement age be?
2. Will you have a retirement age at all in the future? Remember, if you will have one, you will need to objectively justify it.
3. Instead, can you offer flexible retirement? You may wish to offer the opportunity for staff to voluntarily retire from age 65 and create a process where the business considers part time working or modified duties thereafter.
4. Will you have any unexpected problems? For example, in physical roles an earlier compulsory retirement age may be justifiable. The unavailability or costliness of insurance policies may have to be taken into account. Will you introduce the right to insist on a medical? Can you offer incentives to retire, for example a payment akin to a redundancy payment?
5. Carry out an audit of your contracts of employment and Employee Handbook policies. These will need to change in the future, for example to remove any contractual retirement ages that will be unjustified, to remove reference to the current duty to consider regime, and to make provision for whatever changed practices you decide upon.

For help in relation to a specific query click here or call us on 0161 618 1032

Disclaimer – The contents of this page are provided for general guidance only and do not replace the need to obtain legal advice about any given situation.