Articles

Employees to Choose When to Retire as the Default Retirement Age is Phased Out

Current legislation allows employers to set retirement ages of 65 (the default retirement age or DRA) or higher. Legislation also allows employers to compulsorily retire employees who reach the DRA or the higher contractual retirement age. All employers need to do is follow the DRA procedure set out in the legislation which requires them to give 6 months' notice of intention to retire the employee. That notice expires on the date the employee reaches the DRA or other contractual retirement age. Provided the employers follow the statutory procedure, the dismissal will be fair and there will be no possible claim for age discrimination.   

The government is now proposing withdrawing the DRA and the statutory procedure from 1^st October 2011. The proposals are:

1.  From 6^th April 2011 employers will no longer be able to issue notification of compulsory retirement using the DRA procedure;

2.  Only people who were notified before the 6^th April 2011 and whose retirement date is before 1^st October 2011 can be compulsorily retired using the DRA;

3. After 1^st October 2011 employers will not be able to use the DRA to compulsorily retire employees;

4.  Employers can still use retirement ages after 1^st October 2001. However they will have to be able to demonstrate that the retirement age is objectively justified. This means that the retirement age must be a proportionate means of achieving a legitimate aim. Possible legitimate aims are economic factors (the needs of and the efficiency of running a business), the health, welfare and safety of the individual and the particular training requirements of the job.    It is likely to be difficult to objectively justify a retirement age after 1^st October 2011.

5. Employers without a retirement age will have to have a fair reason to dismiss an older employee and must follow a fair dismissal procedure.

The Government is consulting on the proposals until 21^st October 2010 and all employers can express their views. You can access the consultation document at www.bis.gov.uk/retirement-age.   

If the proposals are implemented, employers will be exposed to the risk of unfair dismissal and age discrimination claims if they try to retire an employee after 6^th April 2010.  Employers who wish to avoid this risk may want to consider taking steps now to retire employees who reach the retirement age between now and 1^st October 2011.  If so, it is very important that employers check their employee records to see if anyone is going to reach retirement age between now and 1^st October 2011 and that they start the DRA procedure soon.   

Colman Coyle's experienced Employment Team can advise further and assist you through the retirement process.

For more information on the above or for advice on any other employment issue please contact our employment department on 020 7354 3000 or e-mail employment@colmancoyle.com

Author: Sandra Martins

Date: August 2010