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The Government has confirmed that the ‘Default Retirement Age’ (DRA) will be abolished in order to give people more choice as to when they stop working.
Currently, the DRA enables employers to make staff retire at 65, regardless of their circumstances, without the employee having the right to bring a claim for unfair dismissal. It will be phased out between 6 April and 1 October 2011. From 6 April, employers will not be able to issue any notifications for compulsory retirement using the DRA procedure. Between 6 April and 1 October 2011, only people who were notified before 6 April and whose retirement date is before 1 October can be compulsorily retired using the DRA. After 1 October 2011, employers will not be able to use the DRA to compulsorily retire employees.
The DRA requires employers to give an employee six months’ notice of retirement. As 30 March 2011 is the last date an employer can give an employee six months’ notice of retirement before the DRA is abolished, any valid notifications after that date and before 6 April 2011 will be on a ‘short notice’ basis (i.e. less than six months). The short notice provisions will be abolished on 6 April.
Abolishing the DRA will remove the administrative burden imposed by the existing statutory retirement procedures.
The Government is introducing an exception to the principle of equal treatment on the grounds of age so that there are no unintended consequences for employers that currently voluntarily offer group risk insured benefits (income protection, life assurance, sickness and accident insurance, including private medical cover). There had been concern that removal of the DRA could lead to increased costs and uncertainty for businesses by in effect removing the cut-off point beyond which such benefits are currently no longer offered.
Although it will no longer be possible to compulsorily retire an employee simply because they have reached the age of 65, it will still be possible to have in place a compulsory retirement age where this can be objectively justified. Examples of jobs where individual employers may wish to maintain a compulsory retirement age could include pilots, air traffic controllers and police officers.
The changes will have far-reaching implications for the way many businesses operate and employers who fail to take appropriate action are at risk of claims of age discrimination and unfair dismissal. We can advise you on the practical issues involved as well as on succession and workforce planning, performance management and ensuring that your policies and practices comply with the law.
The Advisory, Conciliation and Arbitration Service has published useful guidance on the removal of the DRA at http://www.acas.org.uk/index.aspx?articleid=3203.
Contact Gary Lee for advice on any employment law matter.