Even with the DRA abolished, UK firms won't have to retain ageing staff indefinitely

The default retirement age (DRA) will be abolished in England with effect from 1 October 2011, and notices of intended retirement date cannot be issued from 6 April 2011.

Alternatives to the DRA

Speak to the employee off the record

Whilst this option is tempting, trying to speak with an employee ‘off the record’ is fraught with difficulty. In brief, simply saying the conversation is off the record or without prejudice does not mean that the employee cannot use the conversation against the firm. An employee could argue that these discussions are an attempt to force him out on the grounds of age, and consequently sue for age discrimination.

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 to discuss future plans with all employees at appraisal time, as this will provide a better idea of who is looking for advancement, who is happy within his role, who is considering retiring, and plan accordingly.

Keep a close eye on performance

Many employers are concerned that the change in law means that they will be stuck with staff who cannot perform and 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.

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, it will be justifiable if the decision can be shown to be a proportionate means of achieving a legitimate aim.

Under the old law, the courts have found legitimate aims for compulsory retirement to be workforce planning, enabling recruitment and retention of younger employees, avoiding an adverse impact on pensions and benefits, ensuring continued competence and having an age-balanced workforce, ensuring job opportunities across generations.

However, firms will need to be careful when implementing a normal retirement age and will need to show that they have balanced the individual’s rights and dignity against the needs of the business.

Difficulties

Succession planning

The most obvious difficulty is that there is no longer a ready-made timetable for retirement, meaning the path to senior positions could be blocked. Firms may also feel unable to ask when someone is intending to retire, leading to shock retirements that leave the firm without proven successors.

Employee relations

Firms may also find it difficult to start discussions about retirement with employees. Even if they do so, many people will not take kindly to the idea that they should retire if they are not ready to do so.

In addition, under the old law, people have often been allowed to continue to work until retirement, with managers overlooking lapses in judgment or incremental changes in performance which can be attributed to age.

In future, firms will be faced with the unpleasant task of performance-managing longstanding cherished staff 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 firms may be happy to allow staff to continue working as long as they choose, and many will want to at least reduce their hours if not stop working altogether as they age.

It is important to note that the abolition of the DRA has no effect upon the flexible working law which is currently in place, and firms will not be under a duty to allow older employees to work reduced hours, unless they are eligible for flexible 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 staff in order to avoid any accusations of age bias or of trying to force out the older members.

Managers will also need to watch for age-related disabilities and, if any disability is found, will need to consider whether
any reasonable adjustments may need to be made in relation to the employee and his employment.

A managed impact

The abolition of the default retirement age has the potential to have a large impact on firms, as staff may choose to remain in their positions longer, hindering succession planning.

Managers will also be forced in many cases to invoke disciplinary procedures to manage the performance of longstanding ageing 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 people continuing to work past the current default retirement age should prove to be a problem. Firms are still free to choose to set a retiring age, provided that they are able to justify this.