Changes in the law: retirement age.

Changes in the law: retirement age.

The thought of retiring any of your current staff may seem a long way off, but the recent changes in the law may need to be reflected in your employment policy, so here is the latest advice:

The government has abolished the default retirement age (DRA). The new law requires an employer to decide whether or not to have a retirement age for staff. There is no longer a statutory retirement age, after which people could work longer by mutual agreement.

There are two options:
1. to have a retirement age
2. to have no fixed retirement age

The pros and cons:
1) To have a retirement age:
a) This must be justified and legitimate. In other words you will need to provide a ‘legitimate aim’ for having a fixed retirement age. Many of the reasons you might think of as being legitimate include:
i) Bring in fresh ideas, increase skills, improve performance, reduce sickness….. and so on.
All these have been found to be unjustifiable reasons by employment tribunals resulting in large costs to the organisations (between 3 – 8 years salary)

b) However if a legitimate aim can be proved then a fixed retirement age frees up posts allowing for progressing through an organisation and new work opportunities. It also offers the retiree the opportunity to ‘leave well’.

2) To have no fixed retirement age:
a) Many large companies are now removing a fixed retirement age from their policies and practices and finding that older staff perform as well as younger staff, even if they take a bit longer to learn new technology. Statistics suggest that age related poor performance is not an issue.

b) To have no fixed retirement age might mean that a person leaving does so through reduced hours rather than making a clean and positive break with the organisation.

c) However to have no fixed age does mean there could be an increased likelihood of having to deal with poor performance from older staff members of any age which could lead to capability proceedings. It could also have an impact on adjustments to working conditions through an increase in age related disability.

What to do:
It would be sensible, now the law has changed to have a look at your employment policy, and if you have a fixed aged for retirement to consult with staff and trustees as to whether this should be changed in the light of the above. If you do away with a retirement age altogether it will be hard to reinstate it at a later date. The advice is to keep the current age and add a clause to say that it is possible to extend the working agreement beyond a retirement age by mutual agreement.  Regardless of the decision it would also be sensible to have an agreed date when the policy decision will be reviewed. Any changes to your policy will need to be agreed by the trustees.