Government confirms it will abolish the Default Retirement Age of 65 this year
The Government has confirmed that the Default Retirement Age (DRA) of 65 will be phased out from 6 April 2011 with complete abolition on 1 October 2011.
This means that, from 6 April 2011, employers will no longer be able to issue compulsory retirement notifications using the current DRA procedure. Between 6 April 2011 and 1 October 2011, only employees who were notified before 6 April 2011, and whose retirement date is before 1 October 2011, can be retired using the DRA.
Therefore, to retire an employee on the last date possible (30 September 2011), you must issue the employee with notice before 30 March 2011, so that you give the requisite 6 months’ notice.
Short notice provisions (of at least two weeks) will remain lawful if they are given before 6 April 2011. However, unlike with the full notification procedure, retiring an employee with short notice means that the retirement will not be automatically fair. Employees can also claim compensation of up to 8 weeks’ pay even if, in principle, the retirement is found to be fair.
One option for employers is to retain a contractual retirement age. However, given the aim of the legislation, a retirement age for all will be extremely difficult to justify.
If there are some roles within a business where a contractual retirement age can be justified, it is imperative for there to be a solid business case to support this and the reasons why it is proportionate. If a default retirement age can be objectively justified, then, in the future, retiring someone will amount to a dismissal for “some other substantial reason”.
Most businesses are likely to opt for abolishing a normal retirement age from 1 October onwards. This means that in order to protect against a claim for unfair dismissal, employers will have to ensure that they have robust capability procedures in place as a way of managing older employees.
Perhaps more importantly, employers will need to be more open with older employees about the organisation’s plans for the future and consider raising the issue of a retirement date as a way of agreeing this with the employee on an individual basis.