From April 6, 2011, the first stage of the abolition of the Default Retirement Age (DRA) comes into effect. Employers will no longer be able to insist an employee retires at a certain age. Transitional arrangements are in place for employees’ retirement notifications already issued and completed by October 1, 2011 provided:

• The employer issues the notification of retirement before April 6, 2011
• The retirement date is before October 1, 2011, and
• The statutory retirement procedure is followed.

To find out more see the Acas Working Without the Default Retirement Age booklet.

Retirement age legislation – what you need to do

As we explained in our post Scrapping Default Retirement Age: Prepare Now, it pays to start thinking about the new retirement procedure sooner rather than later.

Justifying a compulsory retirement procedure

After October 1, 2011, you cannot use the DRA to compulsorily retire employees. There may still be justification where you need to recruit and retain staff, provide promotion opportunities and manage succession, but compulsory retirement may be difficult to justify until more case law emerges.

That said, it may still be possible to retire an employee lawfully at a set age where it can be objectively justified as a proportionate response to a legitimate aim. For example, it may be possible to demonstrate a set retirement age is a proportionate response in the emergency services to ensure employees have the fitness required for the job. And in roles such as air traffic control, it may be possible to justify on the grounds the job requires an exceptional combination of mental and physical fitness.

With no case law to test the new legislation it remains to be seen how it will play out in practice. No doubt some employers will find their actions challenged in the courts. 

Broaching the subject

Our advice is to be open and transparent with your employees. Regularly talk to staff about their plans and aspirations and explore how best to match these to the organisation’s needs. The important thing is to discuss options and the employee’s wishes way in advance of their 65^th birthday. Such discussions will help address succession planning issues you may face as a result of the change.

Start discussions in a general way. Ask about future plans and how the employee sees themselves developing in the organisation over the next year or so. But avoid direct questions such as ‘are you planning to retire in the near future’ or ‘have you thought about retirement’. If the employee brings up retirement during the conversation, there is no problem discussing the details and any adjustments in working hours or other arrangements they could consider in the lead up to it, but do let them bring the topic up first.

Managing performance

Performance management may also need to change with the end of the DRA. However, do avoid falling into the trap of anticipating performance issues just because someone is getting older.

In the past many employers have let older employees coast towards retirement without tackling performance issues that arise. While this was never a good idea, the removal of the DRA could make this an even more costly mistake. It is also potentially discriminatory as you need to treat all staff members with performance issues in the same way.  

Where there are performance issues with someone approaching 65, these should be tackled in the normal way. Effectively managing performance of all employees is an important aspect of ensuring a business thrives. The key is to set clear and unambiguous targets and provide the right level of training and support for everyone.  You can vary objectives to reflect training or other reasons – even for people doing the same job. However, you should not set different objectives merely because of an individual’s age as this is likely to be discriminatory.

See our Performance Management Factsheet for more help and advice.

Ending the employment relationship

Where performance does not improve you may have to resort to dismissal on the ground of capability – as you would with any employee. However, this should be a last resort after you have given the employee a realistic improvement plan and timetable – just as you would with any member of staff.

Keeping a record

Proper record keeping should be the cornerstone of all your people management processes. Ensure you keep notes of appraisal discussions with all staff members.

What the retirement age changes will mean

There is no reason to think the end of the DRA will fundamentally change the way people work. Many people already work beyond the traditional 65 cut off and make their own decision about when to retire. It will, however, make handling performance issues, which may or may not increase with age, more problematic. That said, provided you give all employees clear and attainable objectives and the process is handled sensitively, the problems should not be insurmountable. 

As with any change in employment rights, there is some concern about a rise in unfair dismissal claims. If there is good communication between the employee and their manager, there should be less opportunity for misunderstandings. The important thing to remember is that all employees need to have a regular (at least once a year) discussion with their manager about their performance and their objectives and how this fits with the overall company plan.

Check out the rest of our employment law update 2011.

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From February 1, 2009

Tribunals Service compensation limits increased

• Unfair dismissal basic award will increase from £9,900 to £10,500.
• Maximum compensatory award will increase from £63,000 to £66,200.
• The statutory maximum figure a week’s pay is considered to be for calculating tribunal awards will increase from £330 to £350.
• Breach of contract award remains at £25,000 maximum.

From April 1, 2009

Holiday entitlement second staged increase takes effect

• Employers must ensure employees have a minimum of 5.6 weeks (28 days for five days per week workers) annual leave per year. This can include the eight Bank and Public Holidays in England and Wales.

From April 6, 2009

Right to request flexible working extended

• Right to request flexible working extended to parents with children aged 16 or under.

From April 6, 2009

Statutory discipline and grievance procedures abolished

• The new Acas code of practice for handling discipline and grievance procedures comes into effect on April 6, 2009, when the statutory procedures are abolished.
• Employers should ensure they understand the Acas code, as Tribunals will use this in their judgements.