In March 2011, one month before the process of phasing out the default retirement age (DRA) began, Freshfields conducted a survey on the impact of the new legislation among 76 Human Resources (HR) directors, heads of HR and senior HR professionals at the UK’s top 500 companies by turnover.
After a six month transition period, the DRA will be completely abolished on 1 October 2011, as will an employer’s statutory duty to consider an employee’s request to work beyond retirement. More than half (54 per cent) of those surveyed support the decision to remove the DRA, and 45 per cent agree that the government was right to enact the new legislation now rather than waiting until the economy is more stable. There is clearly a recognition that increasing numbers of people want to work beyond 65 as increasing life spans mean that some people simply cannot afford to retire whilst others, who continue to feel fit and healthy, do not want to retire.
From an employer’s point of view, the chief upside arising from the removal of the DRA is the maintenance of expertise and skills in the workplace (cited by 61 per cent). However, there is nonetheless considerable concern about the damage that will ensue. In short, more than two-thirds (68 per cent) believe that removing the DRA has more potential to damage economic recovery and job creation in the short term than other legislative changes. The responses indicate that this is because of the investment of time and money that will be required to ensure a smooth transition.
The need to embed cultural change in relation to effective performance and use capability procedures rather than retirement to dismiss underperforming workers was identified by 57 per cent as the most critical challenge to address over the next twelve months. This far exceeded the number of respondents with other primary concerns, including developing new approaches to succession planning (12 per cent) and identifying whether retaining a compulsory retirement age could be objectively justified and establishing what such an age should be (1 per cent).
Respondents also demonstrated a feeling that the removal of the DRA will lead to more unpleasant and costly legal actions. 55 per cent believe age discrimination claims will increase and 53 per cent anticipate a similar increase to unfair dismissal claims. The potential for increased numbers of age discrimination claims is particularly concerning given that compensation is uncapped.
There was optimism among 49 per cent of those surveyed that the changes will have little impact on their workforce – and this is despite the fact that 70 per cent of respondents are not proposing to retain a compulsory contractual retirement age. This may be due to the fact that many individuals have a retirement age of 65 firmly etched in their minds and thus will choose to retire at 65 even though they are no longer compelled to do so.
For the full survey results, click here.