Thank you to all of you who completed our survey on the proposed abolition of the Default Retirement Age – we recognise the importance of this issue to you and have now fed your responses and our own views to the Government.
As you will be aware, under current rules employers can require employees to retire when they reach 65, subject to the employees’ right to request to work beyond 65. If the Default Retirement Age (the “DRA”) is abolished, employers will be unable to retire employees at a specified age, unless they can objectively justify the need for retirement at that age (which is expected to be quite difficult).
The vast majority (77%) of those surveyed expressed significant concerns regarding managing the exit of older workers with dignity following the abolition of the DRA. There is a real concern amongst employers (particularly small businesses) that long-standing employees will no longer have a route to enable them to retire gracefully and that employers will be forced to follow a formal process to dismiss those employees for performance, capability or ill health. Of the 23% who were more positive about the proposed changes, they felt that a less rigid system would empower employees who felt able to continue to work to do so if they wished or needed.
Despite the Government's intention to remove the Default Retirement Age in April 2011, 26% of those surveyed said that they would retain a standard company retirement age (which they will have to objectively justify) and 39% said that they were still undecided. 35% said that they currently envisaged operating without a standard retirement age.
Perhaps most worryingly for Government, over 80% of respondents thought that abolishing the Default Retirement Age would cause an increase in the number of Tribunal claims. This demonstrates that there is clearly considerable concern and pessimism amongst employers about how they will be able to manage the exit of older workers and allow for succession planning, if they no longer operate with a standard company retirement age.
If the proposed changes go ahead in April 2011, employers will not have long to prepare themselves for the changes. Whilst government guidance is expected to accompany the changes to the legislation, employers would be well advised to start considering the approach they will take to retirement if the proposals go ahead.