Default retirement age: Employers set to save millions from scrapping DRA

Employers stand to save £45 million in the first year after the default retirement age is scrapped, according to Government estimates.

In the impact assessment published within the consultation on abolishing the DRA, the Department for Business says those savings will rise to £71 million per year in a decade.

These savings will come from reducing the administrative burden of the “right to request” procedure, fewer employment tribunals and “increased profits resulting from increase in labour supply”.

The Government estimates there will be between 200 and 400 fewer tribunal cases as a result of the changes, a point disputed by employers’ groups. David Yeandle, head of employment policy at the manufacturers’ organisation EEF, said the onus would now be on employers to prove whether or not older employees are capable of continuing in their current role.

“Inevitably, this could lead to employment tribunal cases from some older employees who have been dismissed rather than allowed to retire,” he warned.

Estimated one-off costs of the new rules are £38 million, including time taken for familiarisation with the change in legislation (£18.1 million) and the cost of introducing performance and appraisal systems in firms that don’t currently have them (£20.1 million).

The DRA will be scrapped on 1 October 2011, with a six-month transition from the existing Regulations from April 2011.

The Exchequer will gain an extra £79 million in tax revenues in the first year alone and £132 million extra each year after a decade, the figures state.

Michelle Mitchell, director of charity Age UK, said: “There’s overwhelming evidence to show that older workers, the UK economy, public finances and employers themselves will all benefit from the announced abolition of forced retirement legislation. The Government has made the right call on forced retirement and we encourage ministers to stand by it.”

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