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Default retirement age to be abolished by October 2011

Posted: 30/07/10 by Howes Percival

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The Government has announced that the Default Retirement Age (DRA) will be abolished by October 2011.  It has launched a consultation on its proposals, which include a 6 month transitional period commencing on the 6th April 2011.

Implications

Currently under the Employment Equality (Age) Regulations (the Age Regulations), an employer can compulsory retire employees at 65 provided they follow the "right to request" procedure set out in the Age Regulations.  The DRA of 65 operates to make the compulsory retirement of employees at 65 lawful.

When the DRA is abolished employers will no longer be able to rely on it to justify compulsory retirement of employees at 65 or any other age.  Instead any compulsory retirement age employers do decide to operate, will have to be objectively justified. The transitional arrangements which will be in place from the 6th April 2011 will mean that no new notices of intended retirement may be issued after that date (see the Details section below for Government examples of how this will work in practice).

Given the brief transitional period and the prohibition on issuing compulsory retirement notices under the DRA from next April, employers who currently operate a compulsory retirement age will need to assess whether they will be able to objectively justify it; namely whether their compulsory retirement age has a legitimate aim (such as protecting the health and safety of employees or the training requirements of the job) and is a proportionate means of achieving that aim.  The consultation document can be found at www.bis.gov.uk/retirement-age.  The consultation closes on the 21st October 2010.

As a result of the Government’s proposals, employers will need to review employees that they currently have who are 65 or over or approaching 65 years. If the proposals are implemented (which seems likely) it is likely that rather than retiring employees, employers will need to ensure that employees over the age of 65 years are properly managed.  This means that any dismissal of an employee aged 65 or over has to be for a fair reason and follow a fair procedure.

Details

The Coalition Government announced its intention to phase out the DRA in its emergency budget last month (see Howes Percival Newsflash 23rd June). This followed the previous Governments announcement of a review of the DRA. Therefore although the phasing out of the DRA has been in the pipeline for sometime, many have been surprised by the speed in which the Coalition Government has moved to abolish the DRA in its entirety.

The consultation document highlights a number of key changes that employers should be aware of:

  1. The statutory retirement procedures which employers have to following in order to rely on the DRA, will also be abolished with effect from the 6th April 2011. Therefore employees who want to compulsory retire an employee or non employee after the 6th April 2011, will have to follow a fair dismissal procedure. The Government maintains that this is one advantage of abolishing DRA, as employers will no longer have to follow "an inflexible and administratively burdensome set of rules". (BIS Consultation document).
     
  2. Employers will be prohibited from issuing any new notifications of retirement using the DRA on or after the 6th April 2011. However there will be a 6 months transitional period in order for those employees who have already been issued with a notice of retirement before the 6th April 2011 and who are due to retire before the 1st October 2011, to still be compulsory retired under the DRA. Furthermore the provisions under the Age Regulations which allow for the short (2 weeks) notice of retirement are also to be abolished on the 6th April 2011. Accordingly no short notices can be lawfully be given during the transitional period. The examples given by the Government illustrate how the transitional arrangements will work in practice;

    Person A: Is given notification of their retirement date in February 2011. Their retirement date is their 65th birthday, the 30th September 2011. As they were notified before the 6th April 2011, and their retirement will be completed before the 1st October 2011, person A can be compulsory retired using the DRA subject to the correct procedure being followed.

    Person B: Is given notification of their retirement dated February 2011. Their retirement date is their 65th birthday, 5th October 2011. Although they were notified before the 6th April 2011, because they do not reach their retirement date (which must not be before their 65th birthday using the DRA process) before the 1st October 2011, they cannot be compulsory retired.

    Person C: Is not notified of their retirement date before 6th April 2011. Their 65th birthday is on the 30th September 2011. They cannot be compulsory retired because they were not notified before the 6th April 2011 and the short notice provisions which allow less than 6 months notice to be given are removed in April 2011.
     

Employers will still be able to compulsory retire employees after April 2011, but only if they can objectively justify their compulsory retirement age. The Government is exploring as part of the consultation whether providing employers with additional guidance or a code of practice (similar to the ACAS code) would help allay the concerns some employers have about operating without a DRA.

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