On 29th July 2010, the coalition government announced their proposal to axe the current default retirement age of 65. The current position is that employers can compulsory retire anyone who reaches the age of 65 even if the employee does not want to retire, providing they give at least 6 months notice. Under today’s proposals, employers will not be able to make anyone retire, and employees will be able to work to whatever age they choose. Of course, lawyers and business groups have been expecting the default retirement age to be reviewed this year, and had anticipated an increase to the default retirement age to perhaps 68 or 70. Instead, the government have abolished compulsory retirements, representing a very significant cultural and legal change.
Whilst this is an “all gain” situation for employees, there are significant risks and problems for employers who wish to part company with an older employee. Equally, the short timeframe in which the coalition propose to introduce the change is a great concern, and many business groups have already criticised the proposals.
Under the new proposals, employees over the age of 65 will now be treated no differently to employees under the age of 65. If an employer wishes to part company with an older employee they will face a difficult situation and will have to consider dismissing individuals for either poor performance or ill health. Both situations are risky, and employers could find themselves defending employment tribunal claims for unfair dismissal, age discrimination and disability discrimination.
Not only do the proposals represent a very significant legal change, but we are also likely to see a significant cultural change. There will no longer be a presumption that individuals should retire at 65. We also have the big political debate – less opportunities for the young and unemployed, versus older workers working longer, continuing to earn money, spending money which provides investment in the economy and hopefully creating more jobs!
Of course, at this stage we have only been informed of the government proposals, which will require legislation before coming in to force. It will be interesting to see if the government backtrack or go full throttle!!
Lemon&Co’s Employment Law team can advise employers on all aspects of employment law including dismissing employees and retirement issues.
