Most Businesses Want The Right To Retire Staff Automatically

Companies Fear Lack Of DRA Is Stifling Promotion Opportunities For Most Promising Employees

14.12.2012

THE MAJORITY of UK businesses favour the reintroduction of a default retirement age (DRA), with almost a third fearing that without it, they are at greater risk of losing their best younger members of staff due to a lack of promotion opportunities – according to a new study.

The findings from the latest business intelligence report by the Employment and Pensions Group of national law firm, Irwin Mitchell, reveal that out of the 421 organisations surveyed, more than half (53.7%) would welcome the ability to retire staff automatically once they had met a certain age -  a right which was removed in April 2011.

Out of those businesses which said the DRA should be reintroduced, 60% said they would set it between 61-65. Twenty four percent said they thought it should be higher at between 66-70.

Almost a third (29%) said that a DRA would be preferable to the current situation as it provided a balanced workforce and clearer opportunities for promotion of younger staff. A quarter of respondents added that it would provide certainty for both the employer and employees.
 
The right for a company to automatically retire staff when they met a certain age was abolished 18 months ago.  Although the DRA was removed and employment can no longer be terminated on the grounds of age alone, what continues to make it an ongoing and sometimes complex point for employers is that they still have the option to introduce their own retirement age if they are able to legally justify it. 

Tom Flanagan, Partner and Irwin Mitchell’s National Head of Employment, said: “This report revealed some interesting findings, particularly in relation to the strong support for the automatic right to retire staff once they had reached a certain age. It is clear that the use of a DRA before the law changed was widespread and that many welcomed the impact it had on the balance of the workforce and promotion opportunities.

“It was also interesting to note that over 80% of those firms which removed their DRA, did so not because it was right for their business and employees, but solely because of the law change. This again reflects that given the choice most companies would rather have it, but more significantly it shows firms not willing to take what they perceive as a risk and attempt to legally justify a retirement age.”

Despite the majority of firms taking the low risk route and removing a retirement age from their employee contracts, the report did highlight that some businesses were vulnerable to the threat of future age discrimination claims.
 
Here the study revealed that 22.7% of respondents did not have any performance management process in place. Even more significant was the six per cent who claimed to be using a different performance management process for older staff.

Tom Flanagan added: “Now that the DRA has been abolished, the way in which a company performance manages its staff has become highly relevant – particularly in relation to the threat of age discrimination claims. There is a clear argument that if a business cannot retire staff at a certain age, it could potentially be accused of unlawful age discrimination if it uses a performance management process more rigorously simply to ‘manage out’ older employees

“Given the number of businesses who do not have a performance management process and those which treat older employees differently, the low expectation of age discrimination claims that our survey revealed could indicate that some businesses are not thinking the issues through fully.”

Key findings from the survey included:

- Nearly 2/3 said they had a DRA before the law changed.
- Almost one in five confirmed that they still have a retirement age in place.
- Over 80% that previously had a DRA removed it simply because the law changed.
- Over half of organisations would still prefer to have a DRA.
- Providing clear promotion opportunities to staff was a key reason for companies wanting DRA.
- Over 20% do not currently have a performance management process in place for staff.
- 8% of those that have a performance management process do not apply it to all staff
- 6% of have a different performance management process for older staff.
- Less than 1% expected to deal with an age discrimination case in the next 12 months.