Background

  • Government legislation to introduce law that abolishes the default retirement age ('DRA') of 65 with effect from 6 April 2011 (the Employment Equality (Repeal of Retirement Age) Regulations 2011).
  • The legislation signals a major change in policy from an employer being able to compulsorily retire an employee at 65 to allowing the employee a right to choose when to retire.
  • A notice to retire at the age of 65 which is served on or before 5th April 2011 would still be valid under the existing legislation.
  • The legislation will not affect the cost of certain insurance benefits such as health, life and occupational pension schemes. These are exempt and can be withdrawn for employees aged 65 or over.

Why has this been introduced?

  • People are living longer and have a need to continue working beyond 65 to save for retirement.
  • Workforce is ageing as a population and the view is that older workers continuing in employment is beneficial and an important resource.
  • Government takes a view that employers can work without a default retirement age with better planning and managing people with robust performance and appraisal.

Is it still possible to impose a default retirement age?

  • Yes, it is still lawful to impose a DRA if it can be objectively justified on the grounds of achieving a legitimate business aim that the response is proportionate. Based on previous case law and current guidance, the potential legitimate aims are:
    • Performance
    • Workforce planning/Creation of job opportunities for promotion
    • Health and Safety
    • Dignity for the employee

Performance

  • Government statistics show that there is no evidence that performance declines with age, particularly up to the age of 70. The positive aspects of age (experience and expertise) tend to offset any adverse affects. Any decline in performance tends to be in relation to individual cases, not as a group norm.
  • It is still possible to justify a DRA based on performance if an employer can show that the nature of the work is such that performance declines with age.
  • In practice, performance as a justifiable reason for a DRA is likely to be very difficult to prove for most employers.

Workforce planning/creating of job opportunities or promotion

  • The Government's view is that there is no proven correlation between a compulsory retirement age blocking the creation of jobs for younger workers or promotion. If an employer is considering this criteria as a reason to justify DRA, then it should bear in mind the following points:
    • Many employees leave before reaching retirement age in any event
    • A number of older employees will retire at around for lifestyle reasons
    • In some cases vacancies can be created by measures other than retirement (rigorous performance management)
    • It is not always the case that the departure of a retiring employee means that there will be an internal promotion - jobs are often advertised externally
    • If the workforce planning argument is to be used, proper research and a thorough examination of the employees' plans towards retirement need to be carried out in order to justify a DRA.
  • Retaining and incentivising associates could be justified where it really does depend on there being a vacancy at a higher level. The reality is that this is more likely to be the case with small organisations with a very flat structure.

Health and safety

  • This is a very specific legitimate aim and dependent on the job. The ACAS example given is the job of fire fighters where such considerations may be relevant.  

A case by case approach

  • The alternatives facing an employer are to simply allow employees to work until they decide to retire and/or dealing with employees on a case by case basis.
  • A case by case basis approach means that an employer can still dismiss an employee for one of the lawfully fair reasons (e.g. performance, misconduct etc.) or on the basis of age if it can be objectively justified. It is thought that this approach has to be carefully managed as employees are likely to argue age discrimination.
  • If an employer deals with the dismissal fairly, for example by ensuring that the assessment of performance excludes any age related issues (or assumptions about age), then it should succeed in proving a fair dismissal.
  • If an employer can show that the deteriorating performance is genuinely linked with age, then it can objectively justify dismissal, provided it has looked at making adjustments or alternative roles.

Additional steps

It is possible to keep a check on employees' plans for the future and work force manage around this. Questions would have to be asked carefully e.g. ask open questions about the employee's plans in the short, medium and long term.