More thinking needed ahead of retirement age change

The government has been urged to clarify its thinking on the planned scrapping of the default retirement age in order to avoid the risk of extra tribunal claims.

The call has come from the CBI.

The employers' group argued that employers could face greater risks of tribunal claims if the government does not issue more precise legal clarity on the consequences of dropping the default retirement age of 65 as from April 2011.

Under the new rules, employers will no longer be able to terminate the employment of staff members simply because they have reached 65.

The CBI wants to see the new legislation put back a year in order to sidestep the "huge uncertainty" and the "unintended consequences" such a move would involve.

As from April next year, employers will not have the right to force someone to retire once they hit 65. The CBI described the measure as one of the "biggest changes to employment law in 2011" but also maintained that the rules governing retirement will be less clear for both employers and employees.

Although the phasing out of the default retirement age has already been pencilled in, the CBI claimed that the government has yet to produce any draft guidance outlining the new legislative framework.

To make good the regulatory void, the CBI has said that the government should delay the change for a year.

Other recommendations include the safeguarding of retirement conversations; a simplification of the law on performance management and unfair dismissal; a spelling out of how employers can use 'objective justification' to defend a retirement age; and the establishment of the state pension age as a 'milestone' after which employers would no longer have to offer occupational benefits.

John Cridland, the CBI's director-general designate, commented: "The ageing population and the shortfall in pension savings make it inevitable that people will want to continue working for longer. Employers understand this, and businesses value the skills, experience and loyalty that older workers bring.

"However, in certain jobs, especially physically-demanding ones, working beyond 65 is not going to be possible for everyone. The DRA has helped staff think about when it is right to retire, and has also enabled employers to plan more confidently for the future.

"With the scrapping of the DRA in April, a legislative void is opening up. We need to modernise our employment law framework to ensure that it is fit for purpose. In the majority of cases this will not be an issue, but in a minority it will be a serious problem for all concerned.

"The government needs to act fast, and there should be no changes to the retirement framework until these issues are resolved."

The CBI pointed out that, with the number of tribunal claims rising by 56 per cent last year, many employers are worried about more age-related claims once the DRA has been abolished.

At a time when the government is looking to the private sector to generate growth to fuel the recovery, exposing employers to unnecessary risk and cost would be counter-productive.

Currently, employees have the right to request to work beyond the age of 65, and in over 80 per cent of cases these requests are accepted by employers.

Four out of five employers set a default age for retirement, but it is only used in a minority of cases, where it is not possible for an employee to continue post-65. They do this, the CBI continued, because capability reviews are not an effective or timely way of managing the issue.

Mr Cridland concluded: "The government must seize the opportunity to change existing employment legislation so that employers can have confidence when planning to deliver future orders.

"The job still needs to get done, and without a DRA to allow sensible long-term planning, the ability to have the right skills mix and deliver to tight production timescales could be damaged. An urgent solution needs to be found."

A spokesman for the Department of Business responded: "We are committed to helping and supporting employers adapt to the change in regulations and will be providing them with guidance, but we should not stop people from working just because they have reached a particular age.

"Our consultation asked what kinds of support are required and we will be publishing our response shortly, but many of the 500 respondents strongly support the plan that we have set out.

"It is important to remember that the vast majority of employers already choose to operate without fixed retirement ages, and many of those employers with retirement ages already offer flexibility to work longer."