The government has published its response(1) to the consultation on the abolition of the default retirement age. It is proceeding with the original timetable: the last date for compulsorily retiring an employee under the old regime is September 30 2011 and the last date for giving notice of intention to retire is April 5 2011. From October 1 2011 compulsory retirement will need to be objectively justified. However, publication of the final regulations to implement these changes is still awaited, and it is possible that the proposed transitional arrangements may be changed.
At present, employers can compulsorily retire an employee without risk of an age discrimination or unfair dismissal claim at or after a normal retirement age of 65 or above, or at or after 65 if there is no normal retirement age. In order to do so, the employer must give between six and 12 months' notice of its intention to retire the employee, and must follow the statutory procedure for considering a request to continue working.
If less than six months' notice is given, the employee can claim up to eight weeks' compensation. The employer also loses the benefit of the presumption that the dismissal is a retirement, so there is a slight risk of a ruling that the dismissal was for another reason. However, assuming the dismissal is held to be for retirement and the rest of the statutory procedure is followed (including the minimum two weeks' notice), the retirement is lawful.
In order to achieve the six months' notice required under the statutory procedure, notice of retirement on September 30 2011 should be given no later than March 30 2011. Notices between March 31 2011 and April 5 2011 to expire on or before September 30 2011 could give rise to a claim for compensation and a challenge to the real reason for dismissal.
There are two options for employers after October 1 2011.
First, an employer may retain a retirement age and seek to justify it - that is, show that it is a proportionate means of achieving a legitimate aim. Although a legitimate aim may be relatively easy to establish (eg, workforce planning), it is likely to be difficult to show that a specific retirement age is a proportionate means of achieving this. Employers that adopt this approach should start assembling evidence to support their chosen age; Acas, the Advisory, Conciliation and Arbitration Service, has stated that assertions alone will not be enough. Employers operating a justified retirement age will need to adopt a fair procedure when retiring an employee, which is likely to include considering a request to continue working.
Second, an employer may decide to abandon compulsory retirement, in which case older employees with performance issues will have to be managed in the same way as their younger colleagues, rather than simply avoiding the issue until the employee retires. Managers may need refresher training in performance management.
The use of a maximum recruitment age will also need to be justified.
There is some good news for employers: the government is planning to introduce a specific exemption to allow employers not to provide group risk insured benefits (eg, income protection, life insurance, sickness insurance and private medical cover) to employees over 65 (this age threshold will increase in line with the state pension age).
Draft regulations are not yet available, but Acas has produced non-statutory guidance on working without the default retirement age.
Employers which decide that they must do without a retirement age should review their performance management and appraisal processes, possibly building in a discussion about future career plans for all employees (as Acas recommends). They should also consider whether changes may be needed to other benefits and policies, such as enhanced redundancy schemes and share scheme plans.
For further information on this topic please contact Andrew Brown at Herbert Smith LLP by telephone (+44 20 7374 8000), fax (+44 20 7374 0888) or email ([email protected]).
(1) Further information can be found at www.bis.gov.uk/policies/employment-matters/strategies/default-retirement.