From 6th April 2011, employers were no longer able to issue staff with retirement notices. Thanks to the UK population enjoying longer lives and better health, the vast majority of people can now stay in work for as long as they like. There must now be a potentially fair reason for the individual to be dismissed other than their age, e.g. their conduct or capability, or else the employer risks being taken to tribunal for unfair dismissal.
Employees can opt to take retirement whenever they want, but the abolition of default retirement age coincides with the state pension age rising. If an employee opts to take retirement before state pension age, they will not qualify for the payments – which of course will result in employees choosing to stay in work as long as they can.
How employers can adapt to retirement law changes
Many businesses will appreciate the chance to hold on to their experienced and dedicated staff for a little longer. But if an older employee is declining in productivity or unable to cope, there are certain ways that the employer can adapt:
- Objective justification: If there is a health or age-related issue that is – from an objective viewpoint – impeding the person’s ability to do the job, there is fair reason to retain a retirement age. Examples would be failing eyesight for an air traffic controller or physical fitness for a police officer. This of course is not limited to the over-65s.
- Monitoring performance: If you can monitor the individual’s performance and prove it is unsatisfactory, they can fairly be dismissed. Again, capability and conduct benchmarking applies across all staff.
- Managing workloads: If you want to keep hold of a good employee it may be necessary to offer them reduced working hours or workloads. Being flexible could be beneficial to both the individual and the business.
Helping employers cope without a default retirement age
Peninsula can help businesses deal with the abolition of default retirement age. Clients can receive guidance on retiring an employee, monitoring and benchmarking through formal performance management procedures, or offering a reduced workload. Training for employers on dealing with retirement is also available, while non-clients can find out more at one of Peninsula’s free employment law seminars.
Working beyond default retirement age
The abolition of default retirement age means that in effect, employees can continue to work for as long as they want. The benefits are clear: if they work until state pension age, they will receive payments to live off during their retirement. If they choose to work beyond that, they can claim their state pension and their wages without paying national insurance, resulting in a very comfortable retirement indeed.
Unfortunately, although an employee wants to go on working beyond the former default retirement age, that might not always be best for the business.
Peninsula’s HR outsourcing services can come in very useful in dealing with the abolition of default retirement age, especially if your employees want to carry on working. Firstly, we offer HR software which includes simple absence management tools. This will help you keep track of any employees – regardless of age – whose productivity may be affected by their physical wellbeing. Furthermore, employers and HR managers can obtain Peninsula’s employment law advice on adjusting workloads, monitoring performance and the fair procedure for dismissal if there is no other option.
Default retirement age was something of a one-size-fits-all law, sometimes resulting in good workers being retired well before they were ready. Fundamentally, employers are much better off without it, and must simply exercise the same caution and even-handedness when dismissing employees of any age.