Will you still need me, will you still feed me?

The ability to retire employees aged 65 or over automatically no longer exists. From 6 April 2011 employers have been unable to dismiss someone just because they have reached the default retirement age.

Employers can no longer dismiss employees based on ‘retirement age’ unless notification of retirement has already been given to the employee in question. From 6 April 2011 dismissals for retirement are age discriminatory and unfair unless such notification has been provided.
However, this does not mean that employers cannot retire employees, only that they will have to justify it. Case law to date (and under the old provisions) has shown that the following may be valid ground(s) for dismissing an employee:

a. Workforce planning and facilitating the recruitment and retention of younger employees (known as the “dead man’s shoes argument” whereby compulsory retirement of older workers provides a clear and defined career path for more junior workers);
b. Avoiding adverse impact on pension and benefits (i.e. the increased cost of extending such benefits to older workers);
c. Having an age-balanced workforce and sharing job opportunities amongst the generations;
d. Ensuring a high quality of service or ensuring competence; and/or
e. Contributing to a pleasant workforce and protecting the dignity of older employees by not requiring them to undergo performance management procedures.

The last two criteria are the most ‘tainted’ by implications of discrimination and may be dropped over time. While we wait for case law to catch up, useful guidance can be found in ACAS’s publication “Working without the Default Retirement Age”; available free from their website at www.acas.org.uk.

As the door closes on the default retirement age a new one opens in a concept many are calling the “Employer Justified Retirement Age” ( EJRA). Put simply, an employer can apply a blanket EJRA if it is able to establish that this is a proportionate means of achieving a legitimate aim.

Although this is possible, the greatest challenge that any employer will face is to demonstrate that a blanket EJRA would be ‘proportionate’. For example, if an employee is performing why should they be dismissed based on their age alone? It’s a compelling argument that dismissed employees would (and perhaps should) now bring and it is easy to see potential traps for employers that belligerently pursue a rigid policy of retiring employees when they reach a particular age.

Unsurprisingly (and in direct response to these issues) we have seen a spate of employers removing any reference to a retirement age from their contract of employment, instead choosing to justify a ‘retirement’ (dismissal) on a case-by-case basis. Whilst this ‘safe option’ has its benefits, it means that employers no longer have the softer option of dismissing employees through retirement and must use performance management processes. Instead of ‘retiring off’ older workers who no longer meet the demands of the job, they will have to be dismissed in much the same way as any other under-performing employee.

Ultimately the choice is whether an employer wants to retain a retirement age and, if so, whether it can be objectively justified. On the presumption that most employers will want to ‘play it safe’ (i.e. remove a compulsory retirement age or retirement policy) perhaps the first step will be to ensure that performance management procedures are up to task; regrettably, many we see are not.

Looking forward, performance management processes will invariably be tested as older employees work their way towards retirement. In ‘retiring’ employees, will the harsh reality of performance management be tested to breaking point? Well, that’s a topic for another day…

If you are an employer or an employee and are worried about the recent changes to the law concerning retirement then please contact Martin Hopkins on 01245 453818 or email martin.hopkins@birkettlong.co.uk

Written by Michael Harman and Martin Hopkins.