At the end of July the Coalition Government announced their proposal that the Default Retirement Age (DRA) will be abolished on the 1st October 2011. However due to transitional provisions in effect no new notices of intended retirement can be issued to employees after the 6th April 2011.
Background to the DRA
The DRA was introduced in 2006 when the Employment Equality (Age) Regulations came into force. The DRA allows employers to compulsory retire employees at the DRA of 65. Provided the employer follows the statutory 'right to request' procedure the retirement will not be discriminatory on the grounds of age.
The Coalition Government believes that abolishing the statutory 'right to request' procedure will relieve employers of an administrative burden and by extending working lives will lead to an increase in Gross Domestic Product (GDP).
What the Government proposes
The Government intends that, on the 6th April 2011, new Regulations will introduce transitional provisions that:-
- Employers will not be able to issue any new notifications of retirement using the DRA on or after the 6th April 2011.
- Where an employer has already given notice of retirement under the DRA before the 6th April 2011 and the date of retirement falls before the 1st October 2011, the employee can be retired using the DRA.
- All retirements using the DRA will cease completely on the 1st October 2011.
Therefore where an employer has given notice of retirement under the DRA before the 6th April 2011 but the date of retirement is on or after the 1st October 2011, the employer will not be able to rely on the DRA. Furthermore as the short (two weeks) notice of retirement provisions will also be repealed on the 6th April 2011, an employer will not be able to use the DRA to compulsory retire an employee whose date of retirement is before the 1st October 2011, but for whom they have not issued with a notice of retirement before the 6th April 2011. Instead employers will have to ensure that they can objectively justify the retirement of those employees to avoid any age discrimination complaint and will have to ensure that there is a fair reason for any such termination and that they have acted reasonably, so as to avoid an unfair dismissal complaint.
Retirement after the DRA
The Government's consultation document confirms that employers can still operate a compulsory retirement age for their employees but if they do, they will need to objectively justify it. In order to demonstrate this the compulsory retirement age must be a 'proportionate' (i.e. reasonably necessary) means of achieving a legitimate aim (for example, the health and safety of the public or workforce). The Government gives examples of employers, such as air traffic control and police force, who may find it necessary to continue to operate a compulsory retirement age.
Alternatively employers can decide to operate without a compulsory retirement age. This means that employers will have to ensure that any dismissal of an employee over 65 is for a fair reason (for example, capability or conduct) and that they have followed a fair procedure.
How can employers prepare
Part of the Government's consultation seeks views on whether it could provide any guidance or code of practice to assist employers following the abolition of the DRA. While this will undoubtedly be of assistance it may not be published until next year giving employers little time to prepare. The Department for Work and Pension's Age Positive initiative provides information about managing an ageing workforce (www.businesslink.gov.uk/agepositive). Their website offers advice on operating without a compulsory retirement age and has case studies of employers (such as JD Wetherspoon) who already work without a retirement age.
The Employers Forum on Age also offers advice to employers on operating without a compulsory retirement age. Their advice to employers who are considering removing their retirement age includes:-
- Review your organisation's age profile to determine how many employees it will affect.
- Concentrate on performance management. A robust system should be put in place across all levels of the organisation.
- Train line managers on the consequences (i.e. they can no longer 'retire' underperformers).
- Communicate with employees and their representatives to ensure they are on board and reassure them that it is not about taking away pension rights.
- Review flexible working rules as often employees want to flexibly 'retire' by drawing a pension and working part-time.