The abolition of the default retirement age will have a huge impact on how employers operate their businesses. Although the DRA won’t be completely scrapped until 1 October 2011, transitional arrangements from 6 April 2011 mean that employers don’t have much time to get to grips with the proposals. Here are 10 things employers need to know:
1. There is a timetable for scrapping the DRA.
The Government has committed to removing the default retirement age, and there are some key dates that employers should be aware of.
2. The statutory retirement procedure is also being scrapped.
Rather than following the statutory retirement procedure, an employer that wishes to retire an employee will have to follow a fair procedure under the ordinary unfair dismissal rules and rely on one of the potentially fair reasons for dismissal.
- Will the statutory retirement procedure be repealed when the default retirement age is abolished?
- Retirement – current “duty to consider” procedure
3. Transitional retirement arrangements will be put in place from 6 April 2011.
The rules relating to the default retirement age and the associated statutory retirement procedure will be repealed from 6 April 2011. Employers will be unable to issue new notifications of retirement under the current statutory procedure on or after 6 April 2011.
4. Employers will have two options for dealing with retirement.
Employers will still be able to operate a compulsory retirement age, provided that they can objectively justify it. Employers can also stop using a compulsory retirement age.
- How will employers deal with retirement after the abolition of the default retirement age?
- Three-quarters of IRS retirement survey respondents have a contractual retirement age
5. Employers will have to think more carefully about the reasons for retiring employees.
Once the statutory retirement procedure is scrapped, an employer that wishes to retire an employee will have to be able to show that it has a fair reason for dismissal.
- Will anything replace the current statutory retirement procedure after the abolition of the default retirement age?
- IRS retirement survey: why have a contractual retirement age?
6. Employers will have to justify objectively retirement ages.
Employers will still be able to operate a compulsory retirement age, provided that they can objectively justify it.
- After the abolition of the default retirement age, employers will have to justify objectively having a compulsory retirement age. What does this mean?
Case law on justifying age discrimination:
- Tribunal failed to consider if age-based difference in treatment was proportionate means of achieving aims
- Tribunal should have had regard to disadvantage suffered by employee
- Length-of-service criterion as part of redundancy selection matrix does not of itself amount to age discrimination
- Dismissal to avoid age-related benefit was discriminatory
7. Case law gives employers clues as to how retirement ages can be objectively justified.
A recent Court of Appeal case involving partners (rather than employees) in a law firm who were forced to retire, Seldon v Clarkson Wright and Jakes, gives employers an idea of what might constitute objective justification.
8. Employers need to think about how the timetable will affect their workforce.
Each employer should work out when its employees are going to retire and how the proposals affect retirements within its organisation. The consultation document gives examples to assist employers.
- How will the abolition of the default retirement age affect employers that have a compulsory retirement age of 65?
- Model letter from an employer notifying an employee of his or her intended date of retirement and the right to request not to retire
9. Employment tribunal claims in relation to retirement will be common after the changes come into force.
Employers could face the double threat of age discrimination and unfair dismissal claims from employees who have been compulsorily retired.
- How will the abolition of the default retirement age affect employment tribunal claims in relation to retirement?
- Is there a limit on the compensation that can be awarded in an age discrimination claim?
- Age discrimination compensation awarded 2008-09
10. There is still time for your views to be heard.
The consultation asks whether or not the Government could provide additional support for employers in managing without the DRA or statutory retirement procedure. This includes the possibility of future guidance or a more formal code of practice on handling retirement discussions.