Employment laws generate a lot comment. Hardly a day goes by without the media reporting scare stories about the employment rights of UK employees, which are depicted as being anti competitive, unduly restrictive and in many cases overly generous.
So, each month, we are going to expose some of the most common employment law myths and explain the reality behind them. We are not pretending that employment law is easy – it isn’t, but generally it should not be difficult to get the basics right.
Last month we looked at dismissing staff. Click here to read this if you missed it.
This month we tackle retirement.
- It is not possible to retire employees anymore.
Retirement is still a potentially fair reason to terminate employment despite the abolition of the Default Retirement Age (“DRA”) and the repeal of the statutory retirement provisions in 2011 which enabled employers to avoid unfair dismissal and age discrimination claims arising out of an employee’s forced retirement provided they followed the strict statutory procedures beforehand.
However, whilst it is still possible for employers to have their own DRA, they will have to clear a number of hurdles first.
Requiring an employee to retire against their will is on the face of it an act of age discrimination. Recent cases both in the UK and in the EU have shown that it is possible to justify imposing a retirement age on the whole, or part of a workforce, provided the employer can show that it had a legitimate reason for doing so and that the age selected is a proportionate means of achieving that legitimate aim, ie is the right age to meet that purpose. Part of that analysis is identifying that there are no reasonable alternatives. We’ll look at each of these in turn:
We now know that an employer cannot simply rely on its own reasons for imposing a retirement age. Instead, they have to show that their reasons link to wider public policies. The courts have accepted for example, that workforce planning, protecting against incompetence, promoting inter-generational fairness and avoiding an adverse impact on pensions and benefits are all being capable of amounting to a legitimate reason. Therefore, the necessary link with public policy is not, in itself, particularly onerous, as most private aims are likely to reflect some areas of public policy.
Selecting the right age
There is no age after which it is “safe” to retire an employee. Instead employers have to decide what age is appropriate to meet their policy objectives. It may be necessary to select more than one age to reflect different job types within the organisation, or only impose a retirement age for a certain group within the workforce.
Evidence is required to show that the age chosen is the right one. In the case of performance issues, employers must be able to demonstrate that statistically, performance falls off after a certain age. To be safe, an employer should be able to show that it thought about the justification at the time of setting the DRA, not just as a defensive afterthought, having been challenged.
Employers must then go on to show that they have considered less discriminatory ways of achieving their objectives than compulsory retirement. For example, if the employer’s concern relates to performance, this might include looking at imposing fitness or competency tests, or using performance management techniques to weed out poorly performing staff of whatever age.
Employers must document their reasons for the age they have set and keep this under review as this information will be required to justify their retirement age if it is challenged by any member of the workforce.
This area is complex and is one where employers will benefit from professional help.