Default retirement age to be scrapped from April 2011

From April next year, employers will no longer be able to insist that staff retire at the age of 65. Katy Jones highlights the new unfair dismissal risk from older employees.

Last July the Government announced that it proposes to phase out the default retirement age from April 2011.

At the moment you can dismiss an employee when they reach 65, irrespective of the quality of their work or conduct. It is important to follow the applicable statutory retirement procedure to the letter but provided you do so, the employee cannot sue for unfair dismissal.

The scrapping of the default retirement age means that employers will not be able to insist that employees retire at age 65. You will need a statutorily fair reason to dismiss an employee who is aged 65, such as misconduct, under-performance or redundancy. You must also follow a fair process before dismissing them. A fair performance management process usually takes several months and, however careful the employer is, there is always the risk that the employment tribunal takes the view that the employee was not fairly treated.

There is going to be a consultation process about the implementation of the proposed changes between now and October 2010.

The TUC said “‘This is a welcome move. It cannot be right that workers lose their protection against arbitrary dismissal overnight because of their age.”

The CBI said “Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed. This will create uncertainty among employers and staff, who do not know where they stand. There will need to be more than a code of practice to address these practical issues; we will need changes in the law to deal more effectively with difficult employment situations”

You may wish to consider whether there are any employees who are approaching age 65 or older who should be retired under the existing statutory retirement procedures before the proposed changes take effect.

If so, do seek our advice and take care because the statutory retirement procedures are detailed and have to be followed very precisely.