May 6, 2011

Managing without the Default Retirement Age

Filed under: Blog — Grove @ 3:35 pm

Deborah Moon, HR Consultant, considers the key aspects and implications of this change, and the actions employers should be taking as we move into an era of managing without the DRA.

A number of employment law changes took place at the beginning of April, the most significant of which was probably the implementation of the Regulations ending the default retirement age (DRA). The DRA had enabled employers to compulsorily retire an employee at age 65 provided they followed the statutory retirement procedure.

The abolition of the DRA will essentially leave employers with two options for the future:

  • set a contractual retirement age and seek to objectively justify it, or
  • manage retirement on an individual basis, dealing with any concerns regarding an  employee’s capability or conduct through appropriate procedures

Objective justification

Objective justification requires an employer to demonstrate to the satisfaction of a tribunal or court that they have both a legitimate aim (or aims) in applying a retirement age and that the means used to achieve that aim are proportionate, i.e. that they are appropriate and necessary and that the same aim could not be achieved in a less discriminatory manner. What might constitute objective justification will ultimately be matter for a tribunal or court to determine according to the particular circumstances. It is likely that tribunals will take a rigorous approach to this issue and employers will need to be confident that they can provide evidence to support any arguments put forward in defence of the continued operation of a compulsory retirement age.

No fixed retirement age

The alternative approach will be to no longer apply a fixed retirement age, leaving the choice of when to retire to individual employees. In these circumstances, it will be for the employee to resign from their employment, having given you the required notice in accordance with the terms of their contract. For many people, their choice of retirement date is likely to be influenced by their pension arrangements and the level of financial provision they have made for their “old age”. 

If you choose this route you should think about how to plan ahead for an employee’s potential retirement and establish appropriate processes, ensuring that this is handled carefully and sensitively. One approach would be to incorporate this within the annual appraisal (or equivalent) as part of broader discussions about employees’ future aspirations/intentions, thereby ensuring that all are treated similarly irrespective of their age. It will be very important that any discussion of this type is not perceived by the employee as pushing them towards retirement.

It would also be reasonable to consider what other arrangements you can make to help employees plan and prepare for their retirement, for example, by making available flexible or part-time working to enable a phased reduction in hours, avoiding the “cliff edge” of retirement which can be a difficult experience for many employees.

Declining performance or unacceptable conduct of an older worker will need to be properly managed through capability or disciplinary procedures, in the same way as for any other employee. It is important to remember that employees aged 65 and over, who have the necessary qualifying service, may make a complaint of unfair dismissal to an employment tribunal, in the same way as any other employee. This underlines the importance of ensuring that a fair and proper process is followed.

Pension arrangements

There will be a variety of reasons why employees might wish to continue working beyond age 65, not least financial necessity. A recent survey report published by the Chartered Institute of Personnel and Development identified that 56% of employees agreed they have not saved enough for their retirement. This underlines the importance of having appropriate pension arrangements in place, and facilitating access to appropriate support, advice and guidance to encourage longer-term financial planning. Given the imminent implementation of the governments’ automatic enrolment regime, as well as the removal of DRA, it would be sensible to review your approach to pensions as soon as possible.

 

* Note that certain transitional arrangements apply for an interim period in respect of employees who reach age 65 or the normal retirement age, whichever is the greater, before 1 October 2011. For these employees, compulsory retirements notified in accordance with the statutory procedure before 6 April will be lawful, provided certain conditions are met. The latest date an employee can retire under these arrangements will be 5 October 2012.


Acas has published a helpful advisory booklet, Working without the DRA – Guidance for employers, which is available on their website at www.acas.org.uk
Deborah Moon is an independent HR Consultant providing support, advice and guidance to employers on a range of employment matters. To find out more, please email Deborah at deborah@wildfire1.co.uk

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