Employers express dismay at retirement age change
Employers’ groups have voiced worries at the Government’s decision to go ahead with plans to abolish the default retirement age of 65.
The change will be phased in from 6 April to 1 October 2011.
It will mean that employers will be required to base any decision on whether an employee can continue working not on their age but on their ability to carry out their duties.
John Cridland, the CBI’s director general designate, argued that the move will impose a number of practical difficulties on employers.
Mr Cridland said: “The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance. Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.
“Employers accept that more people will want to work beyond 65 as the population ages, but the Government has not recognised the fundamental question, which is how should employers manage retirement on the basis of a performance appraisal. This will be particularly acute in physically-demanding sectors.”
The CBI wanted the measure to drop the DRA put back a year.
Mr Cridland continued: “The majority of respondents to the Government’s consultation had concerns about the adequacy of existing employment law and about the timescale for the removal of the DRA. This evidence strongly supports the CBI’s concerns, but the Government has ignored these legitimate consultation findings.”
The Government has promised help for employers in dealing with the move.
It has published new guidance on the change as well as guidelines setting out how employers can manage without fixed retirement ages and benefit from the employment and retention of older workers.
The Coalition has also pledged to remove the administrative burden of statutory retirement procedures. With the DRA dropped, it said, there is no reason to keep employees ‘right to request’ working beyond retirement or for employers to give them a minimum of six months notice of retirement.
Also to come into effect will be an exception so that there are no unintended consequences for employers who voluntarily offer group risk insured benefits (income protection, life assurance, sickness and accident insurance, including private medical cover). This means that firms will not have to pay pension benefits and private medical insurance cover once an employee reaches the state retirement age.
However, Mr Cridland added: “While it is helpful that group insurance products are being excluded from age discrimination coverage, we now look to the Government’s employment law review to help businesses, especially smaller ones, to deal with the practical implications of the decision to scrap the DRA. The law of unfair dismissal also needs to be revised and simplified.”
Anxieties persist that some businesses will be tempted to retire employees approaching 65 before 6 April in order to avoid the possibility of employment claims after that date.
The timescale of the change also prompted unease at the EEF, the manufacturers’ group.
Steve Radley, the EEF’s director of policy, commented: “Government has missed an opportunity to recognise business concerns by pressing ahead with this change. By doing so in such a short period of time it is giving employers little or chance to prepare for the practical impact on their business of such an important change to employment legislation.
“This is bound to create considerable legal problems and uncertainty for companies and it is now essential that employers are provided with sufficient guidance.”
The Institute of Directors (IoD) questioned the decision to drop the default retirement age altogether.
Miles Templeman, the IoD’s director general, said: “The Government’s proposal to abolish the DRA tells us that ministers are less focussed than they should be on supporting…