Businesses may ‘struggle’ with new retirement rules, says law firm

A LEADING Crawley law firm said upcoming changes in retirement rules will have ‘profound implications’ for businesses.

Monday, 26th September 2011, 12:42 pm

From Saturday October 1 it will no longer be lawful to dismiss an employee on the grounds of retirement.

Currently the Default Retirement Age enables employers to make staff retire at 65 regardless of their circumstances, but the Government feels the rules must change as people are living longer, healthier lives.

Andrew Browning, a solicitor at leading law firm Thomas Eggar, said businesses could struggle to adapt to the changes.

“Many people may not want or be able to afford to retire, making the decision to remove the default retirement age understandable,” he said.

“But the downside of this change is that retirement can no longer be used to dismiss underperforming older employees.

“Employers find it difficult to dismiss employees on the grounds of capability as it can be a long and painful process.

“It is also the case that younger employees, who would have previously relied on retirements to create openings for promotion, may find their efforts to progress frustrated due to older colleagues remaining. Employers may therefore struggle to retain and motivate younger staff.

“The removal of the retirement age means that employers need to ensure that they have effective performance management procedures in place and they will also have to develop structures and incentives that will motivate younger employees to stay with them.”

Although the Government is removing the DRA, it will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it.

Examples could include air traffic controllers and police officers.