MCP Solicitors News

Default Retirement Age

 

This checklist sets out the steps your business should take before the default retirement age (DRA) is abolished.

Why is the DRA being abolished?

  • The DRA of 65 was introduced in 2006. Removing it is seen as a way of encouraging people to work longer and save for retirement.
  • The abolition of the DRA will not mean individuals can never be forced to retire. Businesses can compulsorily retire employees if they can objectively justify the decision, although this is likely to be the exception.

When is the DRA being abolished?

The DRA will be abolished on 1 October 2011. A six-month transitional period (6 April 2011 to 1 October 2011) will be introduced so any retirements your business has already planned can continue through to completion. This is on the basis that:

  • The notification of retirement is issued by 30 March 2011 (or by 5 April 2011 if your business is relying on the “short notice” provisions).
  • The date of retirement falls before 1 October 2011.
  • All requirements of the DRA procedure have been met.

You should identify any imminent retirements within your business and check whether they are covered by the transitional arrangements. If you have already set in motion a retirement that does not follow the procedure (for example, because the dismissal will not take effect before 30 September 2011), you must revisit them. This could mean retracting a letter of dismissal and then following the DRA procedure.

Key dates for your diary

  • 30 March 2011. The last day your business can give the full six months’ notice of dismissal under the DRA procedure.
  • 5 April 2011. The last day your business can issue a notice of dismissal for retirement under the DRA procedure, using the “short notice” provisions, under which an employee can claim compensation (subject to a maximum of eight weeks’ wages).
  • 30 September 2011. The last day a dismissal for retirement can take effect under the DRA procedure.

Retirement age in contractual documents

Abandoning a fixed retirement age

  • If your business decides to abandon a fixed retirement age, you should remove it from your contracts of employment and notify your staff of the change.
  • Where the contract of employment is stated to terminate automatically on the person reaching the fixed retirement age, you should seek to vary the contract so your employees will have to provide the usual notice if they are resigning for retirement. Otherwise, your business will be unable to make appropriate preparations for that employee’s departure.

Retaining or revising a fixed retirement age.

If your business decides to retain a fixed retirement age, you should be able to demonstrate that, before making your decision you:

  • Identified the business needs that are met by having a fixed retirement age.
  • Considered whether there were other ways of meeting this aim.

Share schemes and associated documents

Review share scheme and any associated documents and consider whether the “good leaver” and “bad leaver” provisions need amending, in particular, whether retirement is defined flexibly enough to include retirement in the absence of the DRA or retirement through choice.

Recruitment

If age is currently a factor in your business’ recruitment decisions, this must change. For businesses where there is no fixed retirement age, you will no longer be able to refuse to consider candidates on the basis they are almost 65 or over.

Benefits

Your business will be allowed to withdraw or withhold certain benefits to employees aged 65 or over. For example:

  • Life assurance.
  • Medical insurance.
  • Permanent health insurance.

Appraisals and performance management

Make sure appraisal and performance management processes are tightened up so older workers do not receive greater scrutiny than other employees. Deal with any performance issues as soon as they arise to protect your business from allegations that older workers are being singled out.

Workforce planning

  • Ensure conversations about employees’ future plans are built in to your appraisal process. Only asking older workers about their plans could be seen as discriminatory.
  • Adjust the promotion expectations of younger workers if the retirement age in your business is raised or removed altogether.
  • Even if an employee has indicated they want to retire in the future, they are free to change their mind up until the point they have given notice to terminate their contract.

For any queries, please contact at our Kings Lynn Office Paul Garner 01945 428008 e-mail paul.garner@mcp-law.co.uk