When is it time to throw in the towel on working?

With new ageism legislation likely to come into effect on 1 October 2006,
employers need to get to grips with the fact that the workforce is getting
older. By Angela Dyett, director of consultancy, Human & Legal Resources

Age discrimination has caused much widespread debate, and campaigns have and
will continue to repeatedly challenge assumptions and stereotypes that
influence the way we think.

In theory, employers have until 1 October 2006 – the proposed date for the
introduction of age discrimination legislation – to get their act together. But
we can already see the way things are shaping up.

As part of a concerted effort to eliminate ageism, the Government is
considering what approach should be taken with regard to retirement age, and
the employment rights of those who wish to work beyond the date they are
entitled to start collecting their pension.

In this age of flexible working, work-life balance and longer life
expectancy, many want to work beyond a compulsory cut-off date based on their
age. Some may need to boost their incomes in retirement because their pensions
haven’t provided the return that they’d hoped for. The demand for working
beyond the age of 65 is on the increase.

At the moment, employers can stipulate a normal retirement age within their
organisation, which is often 60 or 65. When an employee reaches this age, their
employment with the organisation will cease and they will have no recourse to
the law to claim unfair dismissal. Similarly, if made redundant, they will
receive an ever-reducing entitlement to statutory redundancy, culminating in
none once they reach their 65th birthday.

Government proposals include a change to this statutory redundancy payments
regime, which eliminates this latter anomaly. In addition, although employers will
be able to stipulate a ‘normal pension age’ for occupational pension scheme
purposes, they will no longer be able to have a mandatory age at which all
staff will be compelled to retire.

The right to claim unfair dismissal and redundancy payments for employees
over the normal retirement age has already been challenged in Rutherford v
Harvest Town Circle. Although unsuccessful, it caused many employers to
consider what they would do if they could no longer rely on a mandatory
retirement age to terminate employee contracts.

The Rutherford case also came at a time when many staff of ‘retirement’ age
were asking their employers for part-time or flexible working options as an
alternative to leaving employment altogether. Thankfully, from April 2006, they
will be able to draw an occupational pension and work for the same employer,
which will help meet these demands. It also means that full-time staff who take
part-time hours in later years can keep their continuity of employment.

Fair reasons for dismissal will continue to be statutory – except, for
example, in cases of illegal working, redundancy, conduct, or some other
substantial reason. Without a mandatory retirement age, the termination of an
ageing employee’s contract would have to be for one of these reasons. This
leads many to believe that the reason for dismissing older staff in most cases
in the future will hinge upon capability.

In the Government’s consultation, some expressed the view that it would be a
shame for illustrious careers to be terminated via a capability procedure, due
to a decline in performance as staff got older. Before, you could have waited
until they reached 65, and then happily sent them on their way with a carriage
clock.

The important implication for the future is that for older workers and all
other employees, managers will have to manage capability issues linked with
unacceptable job performance if they arise. But they will no longer be able to
rely on Old Father Time to help them out.

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