default retirement age abolished
Abolition of the default retirement age leaves questions
unanswered
31 March 2011
The government has published draft regulations on the revocation
of the Default Retirement Age (DRA) with effect from next
Wednesday, 6 April 2011. Although there is some comfort for private
health and social care providers in relation to insurance benefits,
a great many questions remain unanswered.
Key points
Subject to parliamentary approval:
- the DRA can only be used for those who will have reached 65
before 1 October 2011
- the last day on which the 6 to 12 month notice of retirement
can be given under the existing rules is 5 April 2011 - after this
date employers will not be able to issue notifications of
retirement using the DRA
- the last day on which an employee can request continued working
beyond the proposed retirement date is 5 January 2012
- following such a request, continued working may be agreed
either indefinitely or for a set period - if that period is six
months or less, the original retirement notice can still be relied
on
- private health and social care providers may still operate a
normal retirement age provided that it can be objectively justified
as a proportionate means of achieving a legitimate aim – an
Employer Justified Retirement Age (EJRA)
- the provision of group risk insured benefits (such as income
protection and medical insurance) will be exempt from the principle
of equal treatment on the grounds of age and can be withdrawn after
employees reach the age of 65 (this will rise in line with the
state pension age)
With this in mind, we take a look at the key issues to consider
and the actions you should be taking now.
Performance management
Performance management and capability procedures are likely to
become of increasing importance. If you have held back from
performance managing employees who are approaching the age of 65,
in the expectation of being able to retire them, you will now need
to be sensitive in your approach to managing someone whose
performance has been unsatisfactory for quite some time. Particular
sensitivity will also be needed if you have to start performance
managing employees approaching the age of 65 whose performance was
excellent earlier in their careers.
Outstanding issues
Justifying a normal retirement
age:
An EJRA will be justified if it is a proportionate means of
achieving a legitimate aim, but what does this mean?
The guidance available to employers who wish to retain a normal
retirement age is inadequate. ACAS guidance ‘Working without the
default retirement age’ says that “case-law around EJRAs will
develop once the DRA has been abolished.” Employers will therefore
have to await the outcome of litigation relating to normal
retirement ages before having clearer guidance. Surely, the law
should be discouraging litigation, not making litigation the only
way of getting answers to key questions.
ACAS suggests normal retirement ages could be justified in
occupations which require exceptional “mental and or physical
fitness”. Private health and social care providers wishing to
justify a normal retirement age will need clear and specific
evidence (rather than just presumptions) that:
- it will aid workforce planning (such as the need for business
to recruit, retain and provide promotion opportunities and
effectively manage succession)
- public health and safety or another legitimate aim
- there is not another, less discriminatory way of achieving the
same result
This will not be an easy test to pass; there must be objective
justification. Good evidence will be needed to prove that the test
is satisfied and even then it will not necessarily stop claims from
being brought.
Workforce planning:
Employers have long understood that enquiries about an
employee’s plans to start a family must be avoided to avert an
inference of sex discrimination. One might think that the same
should be true for enquiries about the intention to retire and age
discrimination. ACAS nevertheless suggests that employers can sound
out employees about their plans for retirement by asking about
their ‘future plans and aspirations’ as part of appraisals and job
dialogues. But then future plans and aspirations may just become
euphemistic shorthand for ‘retirement plans’, particularly with
older employees. If private health and social care providers are
going to ask their employees about retirement plans, we suggest
all employees are routinely asked, for example, as a
standard question in appraisals.
There are also issues for employers to consider around
disability discrimination and their duty to make reasonable
adjustments, as the likelihood of ill health and disability will
increase as employees get older.
Action required by employers
- review your policies on retirement to ensure they are in line
with the new law. If you wish to retain a normal retirement age,
consider if it can be objectively justified. If not, remove
reference to retirement age from policies and contracts
- consider if you wish to retire any employees who will reach age
65 before 1 October 2011. If you do, make sure that the notice of
retirement is issued before 6 April 2011 and that the notice is at
least six months and no longer than 12 months
- review your performance management and capability procedures as
these are likely to become of increasing importance
Resources
The Government’s response to consultation
ACAS
Guidance: Working without the default retirement age
The content of this bulletin is provided for the purposes of
general interest and information. It contains only brief summaries
of aspects of the subject matter and does not provide comprehensive
statements of the law. It does not constitute legal advice and does
not provide a substitute for it.