Home Business NewsLegal News What new retirement age change means for London businesses

What new retirement age change means for London businesses

by LLB Editor
2nd Oct 11 10:21 pm

On October 1, the government fully abolished the default retirement age

“Don’t write off my wrinkles” said Mirriam O’ Reilly, ex-host of BBC programme Countryfile when she won an ageism legal battle against the BBC, which sacked her as the programme makers wanted to “refresh” the series.

Yet now there are less chances of workers finding themselves in her shoes.

On Saturday October 1, the default retirement age (DRA) became fully abolished by the government, having been phased out since April this year.

While age equality campaigners hail the removal of the ‘best before date’ for employers, business bosses might see themselves being dragged to employment tribunals a little more often than usual.

“Employers shouldn’t assume that performances will go downhill when the employees hit that magic birthday,” says, Rachel Irwin, solicitor at Leigh Day & Co. It defended the Mirriam O’ Reilly case.

“Announcing the judgement in Mirriam case, the judge had said something to effect of ‘The BBC shouldn’t have pandered to assumed prejudices of some younger viewers’. Scrapping the DRA would reinforce this judgement again where employers would be forced to judge an employee purely on the basis of their performance – age and sex no bar,” she added.

The commentariat

Here’s what some of the key commentators on the issues have said in reaction to the default age being scrapped:

Age UK’s director of charity, Michelle Mitchell said: The end of the default retirement  age is a victory for older workers who for too long have been consigned to the scrapheap for no reason other than prejudice.

“With an ageing population traditional rigid ideas about retirement are changing. Many people will want to work longer for personal or financial reasons and prejudice should not lock them out of the workplace.

“The government must continue to work with employers and trade groups to highlight the benefits of hiring older workers. And that message must trickle down to line managers who are responsible for day to day hiring and management,” she added.

Katja Hall, CBI chief policy director, said: “The government has dithered too long on this issue. The DRA was valued as it helped employers to plan ahead and manage changes to the workforce. We urgently need an effective new framework for retirement planning.

In the absence of a default retirement age, the Government must act now to spell out how employers can have a protected conversation about employees’ retirement plans without fear of tribunals,” she added.

John Walker, National Chairman, Federation of Small Businesses, said: “In a survey by the Federation of Small Businesses (FSB), 70  per cent of respondents  said they employ staff over 50 years old and a quarter employ staff who are over 65, showing that small firms are flexible employers.

“However, the FSB is disappointed the Government is scrapping the default retirement age. It is extremely useful for those small businesses that need it and it can stimulate discussions on future career plans and retirement.

“This will also add to the fears of more employment tribunals if an employer does need to dismiss an underperforming member of staff. The FSB believes that the default retirement age should be raised in line with increases to the state pension age to take into account an ageing population.”

How employers should handle the situation

The judgement, on one hand, safeguards the ageing population to work till they fancy, but on the other hand it puts to employers to risk of getting sued even when they intend on laying off employees on fair grounds other than age.

So what if an employer wants to fire a 65 year old employee purely on the basis of under-performance and not age?

Recent statistics released by the Tribunal Service show that the number of age discrimination claims accepted by employment tribunals in 2010/11 rose by nearly  a third (30.8 per cent) to 6,800 with successful cases resulting in an average payout of £30,289.

Speaking about how a middle path can be achieved,  Kevin Poulter, employment lawyer at London firm Bircham Dyson Bell LLP, explains: “The scrapping of the default retirement age has caused some head-scratching for businesses as they look at alternative ways of maintaining a good turnover of employees and positive recruitment at the junior end of the organisation.

“Implementing robust performance procedures, regular appraisals and discussions about career development can assist in managing the workforce, but this, along with inefficient performance, increased absence, costly redundancy payments and the risk of Employment Tribunal claims can be expensive.

“That said, there are many positives, not least the opportunity to ensure that experienced and skilled employees are retained beyond a traditional retirement age and not lost to a life of cruise ships and bowls.”

The scrapping has come at the same time as the number of claims of age discrimination has risen by a surprising 32 per cent in the year to 31 March 2011, despite an 8 per cent fall on the number of claims submitted to the Tribunals overall. 

Poulter feels this is only likely to increase over the next one year or so.

“It is worth noting that the average age discrimination award was £30,289 last year with the maximum being just over £144,000.  I think we can expect both of these figures to rise over the next year as employers are challenged over age related dismissals and the Tribunals sympathise with unfairly dismissed employees,” he says.

Dr Dianne Bown-Wilson, age management specialist at employment consultancy In My Prime, believes that employers need to recognise that they now face financially punitive consequences if they fail to make the underlying requirements of the new legislation a priority.

“In today’s economic climate few employers can afford to stand the costs of such awards and need not take that risk,  particularly when introducing age neutral policies is neither expensive nor particularly difficult,” she says.

“Employers must now put some enthusiasm into tackling the issues surrounding older workers if they are not to find themselves facing claims. There is no doubt that although the majority of older workers are not litigious and would not want to bring a claim if it could be avoided they also have little to lose.

“If they are being unfairly treated or have been forced out of what may well be their last employed role, they may consider that they have much to gain from taking action to try and claim recompense for their treatment,” she says.

All said and done, the judgement has given people the power to choose their date of retirement. But at the same time, it will force employers to think a hundred times before handing pink slips to ageing employees.

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