16th March 2011
Baby boomers: neither shy, nor retiring
Updated: 16th March 2011
At PageRussell we know the benefits a flexible retirement policy can bring to a business. A large proportion of our clients approaching retirement want to slow down rather than stop work completely. Employers will soon have to accommodate their employees’ wishes to work on, as from April to October 2011 the Default Retirement Age (DRA) is phased out.
We asked Becky Moore, a PageRussell client and HR professional, to write this Briefing Note and equip our clients with solutions so this change is a positive one for your firm. This Briefing Note is aimed at employers, but will also be of interest to employees who are approaching the age of 65.
What is changing?
Currently, the only time an employer can force an employee to leave service (other than for disciplinary matters) is when they reach the Default Retirement Age of 65. Currently, employees have the right to ask to continue working, but employers can refuse. From 1st April 2011:
- Employers will not be able to force an employee to retire at the age of 65.
- Employees have the right to continue working past the age of 65 if they wish too.
Is it still possible to have a compulsory retirement age?
The typical employer is unlikely to be able to enforce a compulsory retirement age. To do so the employer must be able to justify it objectively for one or more of the following reasons:
- Economic needs
- Health, safety and welfare
- The particular training requirements of the job
If it does achieve those aims, the discriminatory effect must be significantly outweighed by the importance and benefits of achieving a legitimate aim, and reasonable alternatives should be sought first.
Some groups will be unaffected by the removal of the DRA such as police and the judiciary, partnerships, and where there is a statutory age limit e.g. commercial pilots.
What if you want to retire an employee who is 65 before 1st October 2011?
If an employer wishes to retire an employee who is 65 on or before 1st October 2011, you can legitimately follow the current procedure and retire them from the organisation. You are required to give the employee a minimum of 6 months notice that you would like them to retire. Provided this process is commenced before 1st April 2011, and then no claim can be brought by the employee.
What about benefits-in-kind?
The costs of insured benefits-in-kind increases dramatically over age 65. The new legislation exempts group risk insured benefits (including income protection, sickness and accident insurance, as well as private medical insurance) for employees amd employees’ dependents. So it will be possible for employers to cease to provider or offer insured benefits to employees aged 65 or above. This age limit will increase in line with the State Pension Age.
Having no retirement age does not have to be a problem
Having employees working on past 65 has a number of benefits:
- They are motivated. If an employee could retire but doesn’t, they clearly want to work. Wouldn’t it be nice if all your staff were like that?
- Many older workers may wish to work fewer hours, so there is less pressure on their weekends and holidays. Older workers are often happy to work weekends and holidays as they can still do their leisure activities during the week when venues are quieter (and cheaper).
- There will be many other benefits for your firm; you just have to think about it for a bit.
Watch points
There are a number of actions employers may want to take now:
- Check the age profile of your firm to check who will be 65 prior to 1st Oct 2011 and start the retirement process sooner rather and later if you do not wish them to carry on working.
- Contracts of employment, staff handbooks and retirement policies may need to be reviewed.
- It will no longer be acceptable to ask an employee whether they are thinking of retiring.
What do you need to do differently?
This change is all about having objective measures of all your employees’ capability to do their job – whatever their ages.
The policies and process employers need to put in place to manage the retirement process will also help employers avoid other types of discrimination problems. These need to include better job descriptions, job specifications and skill profiling, improved performance management, better training for line managers and a more strategic approach to retirement.
Some employees can apply for flexible working, although many employers have extended this to the total workforce. This is another way to manage an age diverse workforce, provide job satisfaction and increase motivation.
Offering continued or flexible working instead of retirement can help retain your skilled and experienced employees, reduce staff turnover and recruitment and training costs.
ACAS have published a very useful employers’ guide to working without the default retirement age.
As ever the devil will be in the detail and we will publish updates on these changes when available.
If you require more information and advice on how to do this in practice, please contact Becky at Moore HR Consulting 07872471072 or ku.oc.gnitlusnocrheroomnull@ykceb.
Important declaration
This document does not recommend you buy, redeem or vary any regulated investment. It is believed to be accurate as at 29th September 2010; however no warranty is given as to its accuracy and no responsibility can be accepted by Page Russell Ltd for any action taken in reliance on its contents.
