With the default retirement age for workers due to be phased out - and increased concern over exposure to claims of age discrimination - employers are advised to begin preparing for the contractual changes
THE PROBLEM
The new coalition Government has brought with it fresh debate over the default retirement age (DRA), currently set at 65. As the DRA is set to be phased out over the next few years, where do employers stand and how should they prepare for this change?
THE LAW
Currently, there is a process that employers must follow when retiring an employee. While there is no legal requirement under the current regime for businesses to specify a retirement age, those that do must ensure it is 65 or above, unless there is objective justification for a lower age. Demonstrating such objective justification is a hurdle for any employer, so most will specify an age of 65 or above.
The retirement age, which must be the same for both men and women, can be specified within the employee's contract (Contractual Retirement Age) or established through custom and practice (Normal Retirement Age).
An employer must always notify an employee six to 12 months in advance of the intended date of retirement, informing them of that date and setting out their right to request to work beyond this date.
If an employee chooses to make such a request, the employer is under a duty to consider it, although there is no obligation to accept it. However, rejecting the request without providing an adequate reason could leave the employer exposed to age discrimination claims.
The outcome must be communicated in writing and the employee then has the right to appeal. A failure to follow this formal process could result in an unfair dismissal claim in addition to any age discrimination claim.
EXPERT ADVICE
While most employers are clear on the current procedures, what will happen once the DRA is removed?
Some argue that the removal will only have tangible benefits if it is combined with other measures, such as extending the right to request flexible working to everyone, better training and career development for over 50s, a media campaign to promote age-positive recruitment and health programmes to promote the wellbeing of older workers.
Once the DRA has been removed (with or without the above measures), employers will have to objectively justify any retirement. As stated above, this will mean the employer must demonstrate it is a proportionate method of achieving a legitimate aim. What this means will need to be determined on a case-by-case basis.
Some general examples of potential grounds include workforce planning and avoiding blocking jobs for younger workers, enabling employees to plan their careers and encouraging them to save for retirement, thus avoiding any adverse impact on occupational pensions and other work-related benefits that a lack of retirement age would cause.
Alternatively, the aims could be more specifically linked to the employer's business - for example, health and safety of its workforce or training requirements. In any event, the employer will need to demonstrate that retirement is an appropriate and necessary means of achieving its aims. These considerations should be carefully documented by the employer in every case.
CHECKLIST
● Ensure any existing Contractual or Normal Retirement Age within your organisation is 65 or above (or that a lower age is objectively justified).
● Check whether there is an up-to-date retirement policy and that those involved in implementation are familiar with the requirements.
● Consider life after the DRA - there is likely to be more emphasis on performance management, appraisals, career development and succession planning and you'll need to have watertight grounds to objectively justify compulsory retirement.
BEWARE!
Under the current regime, a claim for unfair dismissal can result in damages of up to £76,700. While any such award would be subject to the individual's duty to mitigate their loss, it is likely to be higher risk with older individuals particularly given the current economic climate. Employers may also face claims for age discrimination (in relation to which damages are uncapped).
When the DRA is removed, the employer will still face both of these risks. Therefore it is important that employers start to ready themselves now for the changes, so as to keep these risks to a minimum.
CONTACT
● Ann Munro is a solicitor at Charles Russell LLP
ann.munro@charlesrussell.co.uk