Friday 25th June 2010

Default retirement age to be phased out

Our aim is to keep you up to date on significant developments in employment law as and when they happen. Today's ebulletin comes following the release of the Budget report earlier this week.

The main point to hit the headlines so far has been the raising of the state pension age to 66, for men initally in 2016, with women following in 2020. It is expected that the state pension age will rise further than this at a later date. However, a separate but related issue has, in our view, far more significance for employers - the scrapping of the default retirement age (DRA).

The current system involves an employee having a "right to request" continuing employment beyond retirement, but it is toothless - an employer can refuse the request without giving a reason, and there isn't much the employee can do about it. The main traps for unwary employers are the procedural requirements and deadlines. Basically, provided the right procedure is followed, an employer can compulsorily retire an employee at the DRA with very little comeback.

We have always known that the default retirement age would eventually be removed. When the age discrimination laws took effect in 2006 it was made clear that the retirement provisions would be reviewed in 2011. All three of the main political parties stated in their manifestos that they would remove the DRA, without giving any timescales for this. The Government's stated plan in the Budget report to "consult shortly on how it will quickly phase out the Default Retirement Age from April 2011" has come sooner than expected and if the DRA is phased out from April next year it gives employers very little time to prepare.

This isn't to say that no one wants workers over 65 - many organisations have chosen to retain staff who have requested to work beyond 65, because they value their skills and experience. However, this has of course been entirely their choice. When the DRA is removed, businesses will only be able to fairly dismiss staff for one of the existing potentially fair reasons and using a fair procedure - the same as any other employee who is protected against unfair dismissal. Yet there are arguments that having the DRA benefits the workplace - by allowing new blood to rise through the ranks, for example, and allowing older employees to retire with dignity rather than being managed out for declining performance or ill-health. However, the dignity argument also works both ways - it is hardly dignified to force an older employee to retire simply because they have reached an arbitrary age, regardless of their abilities.

It seems likely that if employers are no longer permitted to retire their staff, we will see a rise in claims, particularly claims for age discrimination, as both parties grapple with the issues. We will keep you informed on any developments on this topic. In the meantime if you need advice on a retirement issue or perhaps a problem employee who will not reach 65 until after April next year, please contact us.

As always, if you would like to talk through a situation you are dealing with, or would like advice on any aspect of employment law, please do not hesitate to contact any member of the Pure Employment Law team on 01243 836840 or enquiries@pureemploymentlaw.co.uk.

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Please note that this ebulletin is not intended to be exhaustive or be a substitute for legal advice.  The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.