employment:The removal of the default retirement age

 employment job

The UK government has announced plans to scrap the default retirement age of 65 from October 2011.

Currently, employers have the right to terminate an individual`s employment job for reason of retirement at the age of 65 (or the company`s normal retirement age, whichever is the later) without paying any compensation to them. This is subject to the employer following a specific process, which includes consulting with the employee in relation to their continued employment job. Whilst the employee has a right to request that they work beyond the age of 65 as part of this process, there is no obligation for the employer to allow this.

Under the recent proposals, it is suggested that the default retirement age of 65 will be scrapped from October 2011. This has been welcomed by campaigners, but could have significant effects for businesses. The proposals (which are currently under consultation) provide that no forced retirement notices can be issued from 6 April 2011. It is also suggested that, in conjunction with these proposals, the normal pension age will rise to 66 (to take effect no sooner than 2016 for men and 2020 for women), and, in circumstances where an individual works beyond the age of 65, they will be entitled to draw a slightly larger pension when they eventually retire.

Whilst these proposals ease the strain on public finances, they have been criticised, as many businesses suggest that the removal of the default retirement age would add to employers' costs and, under the proposed implementation dates, businesses will not have enough time to prepare. Effectively, under the proposals, the only way to remove an employee who is 65 or over would be by reason of poor performance, redundancy (the employee would be entitled to their full statutory or enhanced redundancy entitlement), conduct or capability. There are also concerns that this will affect younger workers within the workforce. There has been a suggestion that the Government accepts that, in some circumstances, it will be impossible for employees to work beyond the age of 65 for example, police and certain manual jobs. However, in these circumstances, the employer will need to objectively justify its decision to retain any retirement age by showing the decision is a proportionate means of achieving a legitimate aim.

Employers should be mindful of the potential restriction on their ability to manage their workforce and potential increased redundancy liabilities. In addition, employers should consider the potential for the removal of the default retirement to increase the losses employees can seek to recover in respect of loss of earnings in any jobs Employment Tribunal claim (currently, it can be argued, where appropriate, that an employee would not work beyond the age of 65. However, this argument will have limited scope following the removal of the default retirement age). Employers should seek advice in relation to any steps they can take to manage their workforce now.

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