Retiring or not retiring, that is the question
Alexandra Besnard, Solicitor at Sharon Langridge Employment
Lawyers discusses the upcoming changes to the Default Retirement
Age and the implications that may arise.
Up to now, many organisations chose not to operate an actual
retirement age and often found that the situation managed itself;
some employees were happily kept on, whereas others waved an
enthusiastic goodbye the minute they could get their pension. Those
organisations who practised a policy of retiring employees who
reached a specific age (65 in most cases), may face difficulties
carrying out this practice following the introduction of the
Employment Equality (Repeal of Retirement Age) Regulations
2011.
Whilst a Default Retirement Age (DRA) was always felt necessary,
new studies have shown that older workers, at least up to the age
of 70, are no less productive than younger workers except in a
limited range of jobs. On that basis, and to help manage the
financial burden of an ageing population, the Government introduced
the new Regulations which will lead to the abolition of the DRA
from 6 April 2011.
Employers may therefore face a situation where employees stay at
work well into their 70s because they have made no provisions for
the future and only started paying into a pension later in life. We
will consider the new regime and the thorny question of how the
employment ends if there's no default position.
The position until 5 April 2011
Before the Regulations were introduced, employers were able to
issue notice of retirement to employees and effectively compel them
to retire, subject to certain provisos, including offering the
employee the right to request 'not to retire'. The employer however
did not have to accept this request or provide reasons for the
refusal, even though it was good practice to do so. This
effectively offered employers a fair reason for dismissing older
workers with minimal legal comeback.
Whilst employers will be able use the previous regime and issue
a notice of retirement until 5 April 2011 to employees who have or
will attain 65 by 30 September 2011, caution will have to be
exercised and ideally specialist legal or HR advice should be
sought.
The position from 6 April 2011
After 6 April, employers will no longer be able to rely on their
contractual retirement age or the DRA to compulsory retire
employees unless they can objectively justify their decision to
enforce retirement.
Employers may face a dilemma as to what they can do in the face
of ageing employees. The new regime encourages employers to look at
each situation on an individual basis, instead of simply judging
the employee's value by reference to their age alone. In a lot of
cases, it will make good business sense to retain experience and
skills, yet keeping older employees may make it difficult to plan
recruitment and succession planning, and younger employees may feel
aggrieved about the lack of opportunities.
Every business has workers - young and old - who are not very
good performers and the issue is sometimes the lack of robust
performance management steps, which allows them to coast. The new
rules will mean employers will have to tackle performance issues
more proactively and encourage the employee to improve or face
disciplinary sanctions. This can however be a slow and painful
route before a dismissal can be contemplated. What is clear is that
most employers will no longer be able to hide behind the DRA to
soften the blow of parting company with an underperforming member
of staff. Instead, they will need to address the performance issues
through robust appraisal and performance management.
Whilst employers should not make any assumptions, if there is
evidence that a person's performance has been declining, they will
have the right to take action and eventually dismiss the employee
on grounds of performance, as long as they follow due process and
act reasonably.
Employers who are keen to retain a set retirement age will have
to objectively justify their decision with evidence. Guidance is
available on the Department for
Business, Innovation and Skills' website to help employers
understand whether and how they can justify a retirement age. ACAS
have also provided some useful guidance in the 'Working without the
Default Retirement Age' leaflet indicating that 'workforce planning
(the need for business to recruit, retain and provide promotion
opportunities and effectively manage succession) or the health and
safety of individual employees, their colleagues and the general
public' may be a good justification for keeping a default
retirement age. However before deciding whether keeping or
introducing a set retirement age will be lawful in your particular
organisation, it may be prudent to seek advice.
Is the new system introducing a better way?
We all know of an energetic 'older' person who has better work
ethics and is more conscientious than some employees from a
'younger' generation, but we cannot ignore other cases where an
ageing employee has lost their enthusiasm for the job, and is
biding their time until they can afford to retire. Instead of the
previous situation where the employer had a right to retire the
employee, this new regime gives more power to the employee to make
the decision to stay on. This is not the end of the matter,
however, as employers are still able to review their employees'
performance and take action wherever required. Alternatively, they
can review their business needs and attempt to show that there are
real and objective grounds to justify retirement at a certain
age.
This may lead to an increase in the need for professional advice
on managing performance issues to avoid more working relationships
ending unhappily, but since this should apply to employees both
young and old, this can only be good for business overall. Higher
standards of performance are more important today than ever.
Alexandra Besnard, Solicitor
Sharon Langridge Employment Lawyers
www.sharonlangridge.co.uk
