APRIL 2011 |
www.opp.org.uk
INDUSTRY
PEOPLE NEWS ANALYSIS | 23 Ageing gracefully
The employment law on retirement in the UK is about to change. Are you sure that your company has all of the right rules in place? David Regan of Mundays explains how to make sure you don’t get into a dispute with your senior staff.
I
n the UK, the rules on when an employee must retire are about to change. The country’s
offi cial default retirement age will be abolished with effect from 1 October 2011 and notices of intended retirement date cannot be issued from 6 April 2011 onwards.
So … what are the alternative strategies to use when thinking about the default retirement age? How should you approach your staff? What are the pitfalls going to be?
David Regan, a solicitor in the employment team at Mundays Solicitors, takes OPP through the ins and outs.
1. Speak to the employee “off the record.” Whilst this option is tempting, trying to speak with an employee ‘off the record’ is fraught with diffi culty. In brief, simply saying “this conversation is ‘off the record’, or ‘without prejudice’, does not mean that the employee cannot use the conversation against the employer. Therefore an employee could argue that these discussions are an attempt to force them out on the grounds of their age, and consequently sue for age discrimination. 2. Speak to the employee “on the record.”
The best time to do this is during annual appraisals, or at regular meetings. Indeed, it may make sense for employers to discuss future plans with all employees at appraisal time, as this will give the employer a better idea of who is looking for advancement, who is happy within their role, who is considering retiring, and plan accordingly.
3. Keep a close eye on performance. Many employers are concerned that the change in law means that they will be stuck with staff members who cannot perform and who cannot be retired. This is not the case. In fact,
under the new law, employers will have to keep a closer eye on who is performing well, and manage all employees’ performance equally, regardless of age or length of service. 4. Set a corporate “normal retiring age.”
Contrary to popular belief, employers will still be able to set a ‘normal retiring age’ for employees. Although this will be age discrimination, this will be justifi able if the decision can be shown to be a proportionate means of achieving a legitimate aim.
Diffi culties
Succession planning … The most obvious diffi culty for employers will be that there is no longer a ready-made timetable for retirement, meaning the path to senior positions could be blocked. Employers may also feel unable to ask when an employee is intending to retire, leading to ‘shock’ retirements that leave the employer without a proven successor.
Employee Relations Employers may also fi nd it diffi cult to start discussions about retirement with employees as detailed above. Even if they do, many employees may not take kindly to the idea that they should retire if they are not ready to do so. In addition, under the ‘old’ law, employees have often been allowed to continue to retirement with managers overlooking lapses in judgment or incremental changes in performance which can be attributed to an employee’s age. Moving forward, employers will be faced with the unpleasant task of performance managing longstanding, cherished employees if they are not up to task rather than allowing them to continue with the knowledge that retirement is just around the corner.
Flexible Working
In practice some employers may be happy to allow an employee to continue working as long as they choose, and many employees will most likely want to at least reduce their hours, if not fi nish working completely, as they age. It is important to note that the abolition of the default retirement age has no effect upon the fl exible working law which is currently in place, and employers will not be under a duty to allow older employees to work reduced hours unless they are eligible for fl exible working in the usual way.
Performance Management In addition to the employee relations issues highlighted above, managers must ensure that performance management processes are implemented fairly across the entire range of employees in order to avoid any accusations of age bias, or trying to force out the older members of staff. In addition, managers will need to watch for age related disabilities and, if any disability is found, will need to consider whether or not any reasonable adjustments may need to be made in relation to the employee and their employment.
Although the Equality Act is UK law, the Act is based upon the
What is a ‘legitimate aim’? Cases under the ‘old law’ have found legitimate aims to be workforce planning, enabling recruitment and retention of younger employees, avoiding adverse impact on pensions and benefi ts, ensuring continued competence, and having an age balanced workforce ensuring job opportunities amongst the generations. However, employers will need to be careful when implementing a normal retirement age and will need to show that they have balanced the employee’s rights and dignity against the needs of the business.
Equal Treatment Directive, which is European Legislation, and most European countries will have similar laws. In addition, the United States, along with many other countries, has state and federal laws which prohibit discrimination and employers need to have regard to these laws when operating in such countries.
Exceptions There are two exceptions to the abolition of the default retirement age: 1. It does not affect occupational pension schemes and the setting of a “normal retirement age” for the purposes of occupational pension schemes. 2. Employers may withdraw benefi ts
for employees at or over the age of 65 (with the age at which withdrawal will be legal rising in accordance with the state pension age). This exemption deals with a key concern of employers, namely that the rising costs of benefi ts and insurance for employees over the state pension age could make the provision of these benefi ts prohibitively expensive.
The abolition of the default retirement age could have a large impact on businesses, as staff may remain in their position longer, hindering succession planning, and employers and managers will be forced in many cases to invoke disciplinary procedures to manage the performance of longstanding employees, with a subsequent negative effect on morale. However, where there is clear ongoing
dialogue between managers and staff, and all parties are open to sensible communication, there is no reason why employees continuing to work past the current default retirement age should prove to be a problem.
Employers are still free to choose to set a retiring age for their business, provided that they are able to justify this.
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