You cannot have missed the fact that the Government have announced the demise of the Default Retirement Age (DRA) – it has attracted significant media attention, and rightly so, as it will affect huge numbers of people.
The plan is to remove the DRA from 1 October 2011. In practice this means that the last time that an employer will be able to serve an employee with a six month retirement notice will be 31 March 2011. If the employee’s birthday falls before 1 October 2011 but the employer has not served the appropriate notice before 31 March 2011, then it will not be possible to retire them. Any employees whose 65th birthday falls on or after 1 October 2011 will automatically be covered by the new regime and an employer will not be able to retire them. It may be possible for individual employers to justify a specific retirement age, but in practice it is likely to be rare for there to be sufficient grounds to do this.
In the short term it may be that some employers choose to compulsorily retire anyone they can before the new rules come into force. This will include anyone whose 65th birthday falls before 1 October 2011, as well as anyone who has been allowed to stay on beyond 65 but whose agreed end date falls before 1 October 2011 (or who has been allowed to stay on indefinitely, and therefore could be served with six months’ notice of retirement).
In the longer term, the removal of the DRA will force employers to deal with poorly performing employees who previously may have been ignored as they would be retiring soon anyway. While many over 65s are in good health, the chance of ill-health issues does increase with age, so employers will also need to ensure that they manage the situation where an employee’s health declines. Of course, managing performance and managing ill-health are nothing new – but it will come as a challenge to some businesses to deal with these issues with what may be particularly long-serving or senior people. We expect to see a rise in claims, particularly age discrimination claims, as employers and employees get used to the new regime.
From October 2011 the balance will swing more towards the employee – it will be entirely up to them to decide when they wish to retire, and as it will basically be the same as a resignation, the amount of notice they need to give will be relatively short. Although employers might ask about an employee’s retirement plans (although some may be cautious in case the employee argues age discrimination), the employee can always change their mind until the point at which they give notice, which could make succession planning tricky.
The Government is currently consulting about the impact of the change, and consultation will close on 21 October 2010. They have particularly asked for comments on how best to encourage constructive dialogue between employers and employees on retirement – they are currently considering a Code of Practice or similar. We will be submitting a response to the consultation on behalf of ourselves and our clients/contacts – if you have any particular views you would like us to include please contact Nicola Brown on 01243 836843
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected])