Staff Matters

From October 1, employers will no longer be able to “retire” an employee just because he or she has reached a certain age. Employees will be entitled to carry on working until such time as they choose to retire voluntarily or are dismissed for another reason.

Forced retirement will no longer be a fair reason for dismissal and could amount to unfair dismissal and age discrimination. Employers are likely to use capability as a fair reason for dismissing under performing staff above the age of 65 (or, indeed, any other age) after this October.

An employer can still use a compulsory retirement age

Some employers may be entitled to set what will be known as an employer justified retirement age (EJRA), provided that they can justify it objectively. They would have to argue, for example, that it is on grounds of business efficiency, opportunities for younger staff or for succession planning.

It is anticipated that some employers requiring an exceptional level of physical fitness – such as the fire brigade – or mental agility – such as air traffic controllers – will be able to justify setting a retirement age for their employees.

Transition arrangements

A six-month transition period will be in place from April to October. Employers will still be allowed to rely on the DRA by giving notice to employees that they are to be retired in six months’ time up until March 30, provided the retirement occurs before October 1 and all the legal requirements of the retirement procedure have been met.

Late notifications can still be used between March 30 and April 5, but there is a potential financial penalty of up to eight weeks’ pay.

Exemption for benefits

One good piece of news for employers is that group insured benefits will be exempt from the requirement for equal treatment for the over 65s.

Employers will, therefore, be entitled to refuse to extend health insurance or death in service benefits to those above the age of 65. The age limit for this exemption will increase as the state pension age increases.

Action points for employers

The abolition of the DRA raises a number of issues for employers. These are summarised below.

• Employers are faced with two choices. The first is to continue to use a retirement age and face a likely legal challenge from the employee. The employer will then have to satisfy the employment tribunal that this retirement age is justified objectively.

• The second choice is to stop using a retirement age. This now means that in many cases the employee’s career may end in dismissal. Where an employee of 65 or above is performing poorly and his or her performance cannot be improved, the employer will have the option of dismissing on grounds of capability. Some people’s working life will end, inevitably, in an undignified manner.

• It will now be very important for employers to check that their performance management systems are effective and properly followed.

• Workplace planning – including ensuring that the career plans of younger employees are not blocked by more mature members of staff – will become more important.

• Employers should review their employment contracts and HR policies and procedures, including benefits, to ensure that they conform with the new requirements.