23 March 2011

Retiring employees

Claire Harris
Partner | UK

As medical care and living standards have advanced, so our national life expectancy has increased. The corollary of this generally positive trend is that we will need to work for longer in order to fund our retirement.

This has been made easier by the Government’s publication of draft regulations scrapping the current ‘default retirement age’. This means that employers will no longer be able compulsorily to retire workers at age 65.

From 6 April 2011, an employer who wishes to continue to retire employees at a particular fixed age will have to ensure that retirement at that age can be justified in order to avoid a charge of age discrimination under the Equality Act 2010. Whether an age can be justified for a particular role will be a question of fact in every case. An employer will have to be able to show that the chosen age meets a real business need (i.e. there is a legitimate aim) and that it is proportionate to use that age as a means to meet that aim.

Most employers are likely to move away from the concept of a ‘fixed retirement age’ altogether (as it may in practice be very difficult to justify a particular retirement age for all but a small number of specialist roles, such as airline pilots). It would be good practice to institute ongoing ‘workplace discussions’ over employers’ future plans and employees’ aims and aspirations for the short, medium and long term (which may, of course, be influenced by when they want – and when they will be able to afford – to cease working).

What should you do, then, if you need to bring an employee’s employment to an end after the law changes? Employers will still be able to appraise whether staff are performing their jobs effectively, and fairly dismiss those who are not. Review your performance and capability management processes across the workforce (to focus on older employees could in itself be age-discriminatory) to ensure that, if necessary, you can remove employees who are underperforming or who are struggling with the physical demands of a role. For employers who have become used to turning a blind eye to any performance issues as long-serving employees approach retirement, this is likely to require something of a cultural shift – a conversation about a departure on performance grounds may be very different in tone to current discussions about an impending 65th birthday. Agricultural employers should also think carefully about what property rights a housed employee may have on retirement.

The change formally takes effect from 1 October 2011. The current draft regulations permit up to 12 months’ notice to be given (on or before 5 April 2011) to employees reaching their 65th birthday before 1 October, meaning that the employer’s notice of retirement must expire no later than 5 April 2012 (although a request from the employee to retire later, under the existing procedure, could mean the actual date of retirement being postponed to before 30 September 2012). The law of unintended consequences may operate, therefore, to provoke a rash of compulsory retirement notices before 6 April, as employers (already keenly monitoring headcount) act now with a system they know, rather than take a risk with the nascent new approach.

Category: Article

Client types: Farms and estates