Those of you who have attended our recent seminars will be aware that in its recent emergency budget, our new Government announced its plans to remove the default retirement age of 65.
Yesterday, the Department for Business, Innovation and Skills has announced its plans, which are now subject to a consultation process which will run until 21 October 2010.
Whilst today’s media reports have referred to a change in the law from October 2011, in fact the proposals will bite much sooner, with a six month transition period commencing in April 2011 and complete abolition of the default retirement age by 1 October 2011.
If the Government’s proposals become law then:
- employers will not be able to issue new notices of intended retirement under the current statutory procedure after 6 April 2011;
- special “transitional” arrangements will apply to retirements that have been notified before 6 April 2011 to take effect before 1 October 2011;
- employers will not be able to issue notices of intended retirement before 6 April 2011 where the retirement date falls after 1 October 2011.
Note that where an employer is able to give an “objective justification” for requiring an employee to retire (examples include air traffic controllers and police officers), enforced retirement will still be allowed.
Effect of the proposals
Unless an employer can show an objective justification for retiring an employee early, an employee will be allowed to carry on working for as long as he or she wants. This is part of the Government’s plan for people to carry on working longer in order to reduce the cost of the state pension. However, many employers will be concerned that an employee’s performance may diminish with age. This means that performance management processes will become more important as the new legislation starts to bite.
What should you do next?
The timing of the consultation process is extremely tight. The final legislation is unlikely to be confirmed until around the time at which notices of intended retirement need to be sent out by employers for those staff who will retire before the 1 October 2011 deadline. Employers should therefore start the process now of reviewing employees’ retirement ages and be well prepared to send out notices of intended retirement as soon as the current legislative process allows. Employers with a large number of employees approaching retirement should consider how this change will affect their workforce planning issues over the next 12 – 18 months.
With the growing importance of performance management, employers need to ensure that their processes are robust and that managers are trained to raise issues of poor performance at all levels within the business. “Being kind” to those approaching retirement and letting performance issues go unchallenged will no longer be an option. Now is the time to start tightening up on procedures and ensuring that all managers understand their importance.
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