The statutory default retirement age (DRA) of 65 years was removed in 2011, meaning that Employers cannot automatically end your employment when you reach that age anymore (in most circumstances). We thought we'd look at what's happened in the last 18 months since the law changed...
So what does this actually mean?
For many workers, this was great news, as they could carry on working past age 65 if they wanted to. However, this change in the law doesn’t affect the fact that you can still choose to voluntarily retire at age 65 if you wish (and your employer should notify you of this).
Now, employers who wish to end an employees’ employment at 65 will either have to:
- Follow a fair procedure under normal fair dismissal rules, e.g. a dismissal for conduct or capability (treated like any other employee), otherwise they could face an unfair dismissal claim and an age discrimination claim from the employee, or
- Keep their own compulsory retirement age for all employees but be able to justify why they are doing this. This is called Employer Justified Retirement Age (or EJRA). Such dismissals would be on the grounds of ‘some other substantial reason’ and would also need to follow a fair procedure* – this includes giving the employee adequate notice of their impending retirement, allowing them to make representations before a decision is made on their retirement, which includes considering any requests for them to stay on beyond the compulsory retirement age, and finally allowing a right to appeal.
* It isn't clear whether the ACAS Code of Practice on Disciplinary and Grievance procedures applies to EJRA’s or dismissals for ‘some other substantial reason’ (SOSR). A recent tribunal case, Cummins v Siemens Communications Ltd, said the code did apply to SOSR dismissals but this decision is not binding on other tribunals.
Your Employers Contracts and Handbooks must be amended to reflect this new position.
Evidence suggests though that many employers said these changes made succession planning and finding opportunities for younger workers more difficult. Employers have also reported that it has led to:
- Increased costs of redundancies and/or benefits
- More Management time being spent on performance management
- An increase in ill-health absences.
If an employer wishes to keep their own compulsory retirement age, they must be able to justify that it's a proportionate means of achieving a legitimate business aim.
An aim can be ‘legitimate’ if it's related to:
- Economic factors, such as the needs of running a business (e.g. workforce planning – the need for the business to recruit, retain and provide promotion opportunities and effectively manage successions)
- The health, welfare and safety of the individual to be retired, their colleagues and the public
- The particular training requirements of the job.
‘Proportionate’ could mean:
- What the employer is actually doing to achieve its aim
- The discriminatory effect would be significantly outweighed by the importance and benefits of the aim and
- The employer should have no reasonable alternative to the action they're taking.
The employer would need to provide evidence of all of this – that they've ‘objective’ justification for the retirement age. Employers can start by setting out the reasons it needs the retirement age; consider whether they have good evidence to support this; then consider if there's an alternative or less or non-age discriminatory way of achieving the same result.
So what’s happened since the introduction of this? There have been a few high profile employment tribunal cases so far.
In 2012, an age discrimination case was raised when a firm retired an employee at age 65; the UK Supreme Court said that an employer could have their own DRA. They said that:
- ‘Succession planning’ (allowing opportunities for promotion and retention of younger staff where there is real business need for this) and
- Avoiding the performance management dismissals of older workers (who were underperforming – this is referred to as allowing ‘dignity’ by maintaining a congenial and supportive workplace)
are legitimate aims to allow an EJRA (backing up earlier ECJ decisions).
In March 2015, the Employment Appeal Tribunal heard the appeal in a test case against five police forces as to whether the rule requiring police officers to retire after 30 years’ service (to cut costs) is legal (Harrod and others v Chief Constable of West Midlands Police and others). The EAT, in July, decided this didn’t constitute age discrimination (the original Employment Tribunal said it was age discrimination). The Police Superintendents Association gained permission to go to the Court of Appeal and in March 2017 the CoA dismissed their appeal. Lord Justice Bean, leading, said:
"The decision to reduce officer headcount to the fullest extent available was taken in the interests of achieving certainty of costs reduction and it was not for the Tribunal to devise an alternative scheme involving the loss of fewer posts. The second element of the decision, to confine dismissals to officers with more than 30 years' service, cannot be impugned either, because no other method of selection was lawful. The only possible conclusion from these two propositions was that the Respondents' actions were justified and that the Appellants had no valid claim for age discrimination."
So, what age is a proportionate age to pick? Most employers will find it safer at the moment not to have a compulsory retirement age as it can clearly be difficult to show why it's necessary in their business, in relation to their aims.
Where a company carries out a lot of different functions, they'd find it difficult to have a standard retirement age – but they may be able to have a standard retirement age based on job categories (although this doesn't take into account an employee's individual fitness and health levels).
From now on, employers basically need to plan with each employee their individual retirement age – with workers retiring at different ages depending on their capabilities and the job’s requirements.
It's not unlawful for employers to ask employees about their retirement plans (e.g. for the purpose of planning their future workforce requirements), but employers should be wary of the risk of age discrimination by, for example, putting pressure on the employee to retire. Employers can do this by not expressly asking employees what their retirement plans are, but ask them about their future aims and aspirations – ideally as part of a regular appraisal discussion (that applies to all workers).
The government has recently indicated that it intends to review its decision to end the DRA in 2016, so we may have another change in the future.
If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley Furber at The HR Kiosk - a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.
Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.