The move will come into effect in April. The retirement age of 65 was first introduced only in 2006, with the intention of protecting people from being forced to retire early. In practice, the regulation has seen many workers who wanted to work into their late 60s and even early 70s being forced to retire against their wishes.
The CBI had been outspoken in its opposition to the changes. John Cridland, the CBI’s director general designate described the Government’s proposals as “not fit for purpose”.
Cridland went on to say: “The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance. Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.
“Employers accept that more people will want to work beyond 65 as the population ages, but the Government has not recognised the fundamental question, which is how should employers manage retirement on the basis of a performance appraisal. This will be particularly acute in physically-demanding sectors.
James Abbott, tax partner, Baker Watkin: “Imagine the scenario under the new rules – a worker continues beyond retirement age but the employer later feels, let’s assume legitimately, that they are no longer up to the job. The employee doesn’t agree. What an awful way to finish a career when your employer, for whom you have worked for loyally over many years, has to take you through the disciplinary procedure over performance.
Abbott added “Under current legislation, what has normally happened is that the employee and employer have sat down before the compulsory retirement age and, if it suited them both, the employee would continue to work on a fixed term contract beyond the normal retirement age. After that fixed period there would be a further review. I believe wholeheartedly that older workers have an important role to play beyond retirement but I fail to see why we have to legislate.”
From 6 April employers will no longer be able to give six months’ notice of forced retirement. The default age will be scrapped completely from October. While the move is likely to strain relationships between business and the Government, other measures to placate businesses are expected to follow, including the introduction of a fee to lodge claims in an employment tribunal, and doubling the qualifying period for unfair dismissal cases to two years.
Scrapping the default retirement age was a manifesto pledge by both Coalition parties. Supporters of the scheme say it will benefit hundreds of thousands of people at risk of being forced into retirement, and is in keeping with the fact that people are living longer and healthier lives.
However, some including Paul Short, Partner at the lawyers, Lambert Chapman wonders if it might have the reverse effect. He said: “I wonder if the law of unintended consequences might be invoked by this move. Will it make some employers more wary of taking someone in their 50s and prefer younger employees because of concerns about having an aging work force? Getting 50 year olds back into employment has been a problem and it may be exacerbated by this measure. Small employers do worry about staff getting old together – a bit like the Aussie cricket team – and not being able to have a succession plan in place.”
This was a view echoed by Sian Davies, Employment Law Partner at Capital Law, as she said: “Currently a drop in performance level tends to be ignored as employees near retirement. Employers often wait for employees to leave rather than address performance issues with long serving staff. Now employers will be more inclined to address performance issues actively, which will result in quite a culture change for many work places.