Companies ‘Must Think Ahead On Retirement Age’

Employment Lawyer Urges Firms To Plan For Changes

13.01.2011

Businesses must begin the process of assessing how the Government’s changes to the national ‘default’ retirement age of 65 will affect them, an employment lawyer at leading national law firm Irwin Mitchell has advised.

The Government has confirmed that the default retirement age will begin to be phased out  between April and October 2011, meaning that employers will in the future be unable to automatically force employees to retire at 65 through the current statutory retirement process.

Where, however, an employer has given notice of retirement  before 6 April 2011 and the intended date of retirement is before 1 October 2011, the statutory retirement procedures will continue to apply.

Ed Cotton, a Partner in Irwin Mitchell’s Employment team, said: “Today’s news means that businesses need to start thinking carefully about the impact that the end of the default retirement age could have.”

Discussing why the changes have been proposed, Ed explained: “The decision taken is in response to the impact of the ageing population and also hopes that people can be encouraged to continue in work.

“There’s a strong argument that such a move could reduce the strain on the public purse as many older people continue to pay tax while claiming state pension.

“However, there is evidence that employers are not fully supportive of the plans, with some concerned it will impact on the management of their workforce and potentially add costs in relation to medical insurance and healthcare policies.”

Offering advice to businesses unsure about where the Government`s decision will leave them, the employment expert added: “Companies still have an opportunity to make use of a retirement age in their business, but they will need to be able to back it up with solid evidence that can justify the need to retire employees when they reach that age. Employers will also still be able to terminate employment on other grounds such as ill health or capability in appropriate circumstances.

“A failure to act reasonably and fairly could leave employers open to claims on the grounds of both age discrimination and unfair dismissal, so it is undoubtedly an area in which employers should tread carefully.

“From our discussions with clients, and considering the current economic climate, it seems that some firms will find that the changes to the law could present significant challenges, particularly when it seems that many employers are reluctant to tackle performance or capability issues with their older employees out of respect for their achievements in the past to allow them a dignified exit rather than one perceived to be less so.

“In light of this, I would urge any companies to seek advice to minimise their exposure to legal risk in the aftermath of the changes.”