Update 14 February 2011: the default retirement age (DRA) will be scrapped from 1 October 2011, with transitional arrangements from 6 April 2011.
According to a recent CBI survey, almost one-third of all employees are making a request to work beyond their intended retirement date, and employers are granting 81% of those requests. What are the steps that employers and their HR managers should take to ensure such requests are handled lawfully?
Q What is the correct procedure for dealing with requests to continue working?
A The employer must give the employee written notification of the date it intends to retire him/her – the intended retirement date (IRD) – not more than 12 months or less than six months in advance of that date. If the employer misses this deadline, it must notify the employee as soon as possible and may be liable for compensation. If the employer fails to notify the employee within 14 days of the IRD, the retirement dismissal will be automatically unfair. The employee may request to work beyond the IRD if they wish to, by making a request in writing not more than six or less than three months before that date.
The employer must then hold a meeting with the employee within a reasonable period and notify the employee in writing of its decision, unless it is mutually agreed before the end of that period that employment will continue indefinitely, or for an agreed length of time. If refusing to extend employment – or offering a shorter period of extension than that requested – the employer must notify the employee of the right to appeal. Any appeal meeting must be conducted within a reasonable time of the receipt of the request. Again, the employer’s decision must be given in writing as soon as is reasonably practicable.
Q What is the obligation on the employer to consider requests?
A The employer has only a duty to consider a request made by an employee to continue working and there is no obligation to grant that request. Unlike the flexible working procedure, there is no list of proscribed reasons for refusing a request and the employer is not obliged to share its reasons. However, an employer should always consider whether it should give its reason, depending on the particular circumstances.
Q Can an employee be compulsorily retired?
A The Employment Equality (Age) Regulations 2006 (the regulations) state that it is not age discrimination to retire someone at or after the age of 65, providing that the reason for the dismissal is retirement and providing that the employer has followed the correct procedure. The charity Heyday is challenging this issue in the European Court of Justice, arguing that requiring an employee to retire at 65 is discriminatory and that the UK position under the regulations does not reflect the European directive.
Q If the employer’s normal retirement age (NRA) is below 65, will that mean that it is discriminating against employees?
A Employers with a retirement age below 65 must be able to justify it by showing that it is a proportionate means of achieving a legitimate aim. In reality, this is a difficult standard to meet and few employers will be able to show this.
Q Are there time limits on how long a contract should be extended?
A The employee can ask to remain working indefinitely, for a stated period, or until a stated date. The employer may grant, refuse or negotiate on the requested extension.
Q What are the pension rights of an employee who is granted permission to work past the IRD? Can they draw a company and state pension and continue working?
A If an employee has reached the age where they would qualify for their state pension, they can choose to claim it while continuing working, or to delay claiming it. When employees later claim their pension they may be able to choose between getting either extra state pension or receiving a one-off taxable lump-sum payment. Whether an employee elects to work and receive their company pension will depend on the rules of their scheme.
Q What rights does the employer have to re-negotiate the terms and conditions of employment for an employee who continues to work?
A If the request to continue working is granted, the employee will automatically continue on the same terms and conditions as before reaching the IRD. It is open to the parties to renegotiate any terms, although the changes would have to be mutually agreed and not discriminatory on the basis of age, or if such changes are discriminatory on the basis of age they must be objectively justified.
Sarah Boulton-Jones, associate, employment group, Olswang