Government announces the end of the statutory default retirement age

The Government has announced that it is to phase out the Default Retirement age from the 6^th April 2011, with the complete abolition taking place from the 1^st October 2011.

This change will mean that employers will no longer be able to issue compulsory retirement notices to staff after the 5^th April 2011, using the current statutory procedure and scheme. The current procedure enables employers to require staff to retire, subject to going through a notification process, and informing the employee that he/she has a right to request to work beyond the normal retirement age. The current procedure does not oblige an employer to accept any request to continue working beyond the expected retirement date, and they do not force employers to give reasons why any request has been rejected. The process, if followed correctly, enables the employer to achieve a fair dismissal of the employee concerned, which leaves it almost impossible for the (now former) employee to challenge in an Employment Tribunal.

The changes that have been announced follow consultation on the retirement provisions.

Between the 6^th April 2011 and the 1^st October 2011 only people who were notified before the 6^th April, and whose retirement  date is before the 1^st October 2011, can be retired under the current compulsory provisions under the Default Retirement Age provisions. After the 1^st October 2011 employers will not be able to retire staff using the default retirement age provisions. From that date employers will only be able to retire staff under a compulsory retirement policy if they can demonstrate that the retirement can be “objectively justified.”

As employers are required to give 6 months notice of any compulsory retirement, any notification given after the 30^th March 2011 but before the 6^th April 2011 will be on a “short notice” basis. Notably, while “short notice” of at least 2 weeks is allowed under the current scheme, it does still leave the employer vulnerable to challenge in the Employment Tribunal, where the ex-employee can claim compensation.

Many employers have been worried by the possibility of incurring substantial insurance costs in insuring older employees. The Government has therefore announced that it will introduce an exception to the age discrimination rules so that employers can stop offering employees insured benefits, such as life assurance, and private medical care, beyond normal retirement age.

ACAS and the Government have worked on producing on the law that will apply with these changes. However, the guidelines are not particularly detailed or helpful to businesses in assisting them in deciding if they can establish an “objective justification” for a compulsory retirement age.

This change is bound to lead to major problems for employers, particularly as the Employment Tribunals have thus far proved very reluctant to accept reasons from employers to amount to “objective justification” for a compulsory retirement age.