Abolition of the default retirement age: checklist

Elizabeth Stevens of Steeles (Law) LLP continues a series of articles on the abolition of the default retirement age with a checklist to help employers prepare for the abolition. Employers should review their policies and procedures in light of the abolition of the default retirement age and consider how many employees will be affected by the changes to the retirement provisions. 

1. Be aware of the Government's current guidance on changes to the retirement provisions.

Employers should ensure that they are aware of the current available guidance on the impending proposed changes to the retirement provisions and how the abolition of the default retirement age will impact on current retirement practices. Employers can refer to the guidance that Acas has published on the retirement process and the removal of the default retirement age (Working without the default retirement age (PDF format, 856K) (on the Acas website)). The Government has also published guidance (Managing without a fixed retirement age (on the Business Link website)).

See also Abolition of the default retirement age: overview in this series for details of the provisions.

2. Carry out an audit of the workforce.

If an employer's normal practice is to retire employees at 65 (subject to it considering requests to remain), it should carry out an audit of its workforce to identify those employees who are due to reach the age of 65 prior to 1 October 2011 (when the default retirement age is due to be abolished). Employers should give careful consideration to whether or not to take the necessary steps to retire these employees compulsorily, while this option is still open to them. An employer that does so runs the risk of creating resentment within its workforce and potentially attracting bad publicity. However, provided that it follows the statutory retirement procedure, it will avoid the risk of successful claims for age discrimination and/or unfair dismissal, which would arise if it retired employees after the abolition of the default retirement age.

3. Ensure that all retirement notices are issued before 6 April 2011.

The last date on which an employer can give a notice of retirement under the statutory retirement procedure is 5 April 2011. Retirement notices issued on or after 6 April 2011 will not be effective (even those for which the retirement date is prior to 1 October 2011). Employers that issue notices of retirement on or after 6 April 2011 risk claims for unfair dismissal and/or unlawful age discrimination, unless they have their own objectively justified contractual retirement age.

Under the current retirement provisions, employers must give employees between six and 12 months' notice of retirement. Under the transitional provisions in the draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011, published on 17 February, this notice can expire after 30 September 2011, provided that the employee is 65 (or the employer's normal retirement age if that is higher) on or before this date.

According to BIS, this means that the last possible date on which an employer can retire an employee under the default retirement age is 5 April 2012 (where the employer gives an employee who reaches 65 (or the employer's normal retirement age if that is higher) on or before 30 September 2011 the full 12-month notification of retirement on 5 April 2011).

This is a change to what was previously stated in the Acas guidance on the repeal of the default retirement age produced in January 2011. The Acas guidance previously stated that "the last day that employees can be compulsorily retired under the default retirement age is 30 September, so the last day to provide six months' notice required by the DRA provisions is 30 March 2011" and "employers can still use the DRA between 30 March 2011 and before 6 April 2011 but if they do they must use the short notice provisions". The Acas guidance has now been changed and reflects the content of the draft Regulations.

The "short notice" provisions under the statutory retirement procedure, which currently allow an employer to give effective notice of retirement of less than six months, will also no longer apply from 6 April 2011.

4. Issue retirement notices only to those employees who reach retirement age before 1 October 2011.

Under the transitional arrangements set out in the draft Regulations, retirements that were issued prior to 6 April 2011 can continue through to completion, provided that the requirements of the statutory retirement procedure are met and the employee will reach age 65 (or the employer's normal retirement age if this is higher) between 6 April and 30 September 2011. (It is unclear at present if the Government intends to limit this to employees achieving this age from 6 April 2011, as this would appear to prevent employees who have reached this age before 6 April from being retired under the transitional provisions. We are seeking clarification if this is an error.)

5. Consider whether or not employment contracts need to be amended.

If an employee's contract refers to a retirement age of 65 (or older), this reference will need to be removed unless the employer opts to rely on its own objectively justified retirement age. The contract should make clear that employees who choose to retire will need to give their employer proper notice, in accordance with the contract, in the same way as they would for any resignation.

6. Amend policies and procedures to take account of the abolition of the default retirement age.

Existing policies and procedures may assume and include references to a retirement age of 65. They may need to be amended to take into account the abolition of the default retirement age (unless an employer justified retirement age applies) and to reflect the fact that employees may be working beyond 65. For example, if the employer has a retirement policy this must be reviewed. Equal opportunities, performance management and sickness absence policies may also need to be amended to reflect the changes to the law.

Employers could also consider amending their flexible working policy to allow all employees to apply for flexible working, not just those currently covered by the statutory right to request flexible working. The Government is planning to extend the right to all employees in any event, and flexible working arrangements have already been adopted by many employers to accommodate the needs of older workers (for example if they want to reduce the number of hours that they work in the years prior to retirement). However, employers will need to be careful that they do not discriminate on the ground of age against younger workers, in their application of the flexible working policy.

In terms of benefits policies, employers will be permitted to continue to restrict access to group risk insured benefits (for example, income protection, death-in-service and private health insurance) to employees under the age of 65, but other benefits and employee share schemes are not subject to this exemption and should be offered to all employees regardless of age (subject to any qualifying requirements).

7. Consider how and when to ask employees about their retirement plans.

Employers will need to have some idea of employees' future plans to be able to make workforce decisions, such as succession planning. The Acas guidance document makes it clear that employers are entitled to plan workforce requirements to meet future business needs. It suggests holding "workplace discussions" with employees, which should be undertaken voluntarily and in an atmosphere of trust. One of the easiest ways for employers to hold these discussions would be to incorporate them into the normal appraisal or performance development processes. The guidance suggests that the discussions should be simple, informal and confidential in nature, and that employees should participate as openly and frankly as they can.

Employers should consider reviewing their current appraisal process to incorporate discussions about future plans, but avoid asking questions that could be suggestive of age discrimination. Questions about future plans and training needs should not be restricted to older workers, but the Acas guidance also makes it clear that the same questions do not need to be asked of all employees irrespective of where they are in their career. Employers should make sure that all managers who are responsible for holding these discussions understand what their obligations are. They should be trained on how to conduct the discussions in a way that minimises the risk of age discrimination.

8. Ensure that performance management procedures are robust.

Following the abolition of the default retirement age, employers will no longer be able to rely on the retirement of underperforming older workers for their employment to come to an end. The Acas guidance makes clear that a failure to address poor performance in older workers in the expectation that they will soon be retiring, or because it may be seen as undignified, may well be discriminatory.

It will be important for employers to follow a proper performance management procedure in respect of an employee who is underperforming, before considering dismissing him or her on the ground of incapability. Any assumption that poor performance is related to age should be avoided. Provided that a proper procedure is followed, dismissal of an older worker for performance reasons is likely to be a fair dismissal and not discriminatory on the ground of age.

9. Consider whether or not recruitment practice and procedures should be amended.

Employers will not be able to assume that their employees will retire at 65 and this is likely to have an impact on the number of new employees that an employer needs to recruit. Employers that undertake a regular recruitment programme for trainees or junior staff may need to consider whether or not the numbers recruited should be reduced.

The current exemption from the age discrimination provisions that allows employers to reject an applicant who has reached, or is within six months of reaching, the retirement age of 65 or older, will no longer apply. Employers should amend existing recruitment arrangements to ensure that they consider applications from candidates of any age on the basis of merit and suitability for the job in question rather than their age.

10. Consider whether or not a compulsory retirement age can be justified.

Once the default retirement age is removed on 1 October 2011, employers may want to consider introducing their own compulsory retirement age, which must be objectively justified. The Government refers to this as an "employer justified retirement age". The majority of employers are likely to have difficulty establishing objective justification.

To establish objective justification, an employer must be able to show that it has a legitimate aim (for example, to preserve health and safety or for purposes of workforce planning), and that the retirement age selected is a proportionate means of achieving that aim. The Acas guidance referred to above includes guidance on employer justified retirement ages.

Next week's topic of the week article will be frequently asked questions on the abolition of the default retirement age and will be published on 28 February.

Elizabeth Stevens is a professional support lawyer in the employment team at Steeles (Law) LLP (estevens@steeleslaw.co.uk).

Further information on Steeles (Law) LLP can be accessed at www.steeleslaw.co.uk.