Guidelines on Default Retirement Age (Part 2)

Following on from last week’s newsletter this is the second of three newsletters we will be sending you to bring you details of this impending change in law and guidelines on how your Company can manage these changes.

MANAGING PERFORMANCE AND RETIREMENT 

Stopping using retirement ages - Tips and Guidance

General principles

The removal of the default retirement age (DRA) is an opportunity for you to review your practices and processes for managing employees and their performance.  Good people management is the best way to adapt to the removal of the DRA. Talking to your employees and allowing them opportunities to communicate openly and regularly is essential.  Having regular conversations with all employees about your expectations of them, their performance and future plans are invaluable. These should not be limited to younger or older employees.

Managing performance and retirement for older workers

Two thirds of businesses already operate without a fixed retirement age. Research shows that older worker productivity does not usually decline, at least up to the age of 70, where these workers have received the same level of training as younger colleagues. Older workers also tend to have fewer accidents and take less short-term sick leave.

Older workers do not tend to block opportunities for younger workers. Evidence indicates that there was no positive effect on youth employment from measures which allowed older workers to retire early. Some employers believe that removing older workers to make way for younger workers can damage productivity with the loss of existing skills and experience. This can lead to increased staff turnover and increase the cost of recruiting and training new workers.

To help your business manage without a set retirement age, you should:

·         Plan ahead - use formal or informal performance discussions to talk about on-going work options, retirement options and further skills development. Ask all employees where they see themselves in a year or two to open up discussions about their options.

·         Encourage employees to initiate discussions with their manager at any time to discuss options for continuing to work or retiring. A good time to do this might be after they receive a pension scheme notification about their forthcoming pension entitlement.

·         Ensure all managers are trained in how to manage regular performance discussions to also give feedback, motivate and develop staff regardless of an employee's age. Reviewing the performance of just certain age groups, younger or older, could raise concerns about unlawful age discrimination.

·         Use discussions to manage under-performance, whatever the age of the employee. Difficulties might be remedied through training, a change of job role, workplace adaptation or a change in working pattern. If poor performance cannot be resolved, follow the normal 'fair dismissal' procedures that apply to employees of any age.

·         Review your business retirement procedures and communicate your policies clearly to managers and staff. Older workers should be aware that they can work longer but are not expected to work indefinitely.

·         Consider offering a flexible approach to retirement to help retain key skills for your business. A change in working patterns, reduction in hours or a different role may encourage your experienced older workers to stay at your company and perform more effectively. Remember, if flexible working is not open to all, then targeting it at older workers would need to be objectively justified. See the page in this guide on flexible working for older workers.

·         Think about directing older workers to sources of support which can help them prepare for the financial and personal changes they may face when they retire.

Exclusions from Age Discrimination - Insured benefits

The Government has stated that it will introduce an exception to the age discrimination rules so that employers can stop offering employees insured benefits, such as life assurance and private medical cover, beyond their normal retirement ages. Businesses had been concerned that the removal of the DRA could lead to substantial costs for providing insured benefits for the over 65s.

Some frequently asked questions about working without the DR A

Q          I have an employee who is not performing as well as I would wish, I was hoping to use the DRA to dismiss him when he reaches 65 but now cannot do this because the law has changed. What can I do?    

      

A          You may use one of the reasons for fair dismissal. However, a workplace discussion can help you better understand the employee’s intentions regarding their retirement. If they intend to retire then you can allow this to happen but remember an employee can change their mind. Where an employee is performing poorly and their performance cannot be improved, you have the option of dismissing them on the grounds of capability.

Q          Do I have to have a retirement discussion with my employees?

A          No, there is no requirement to talk to employees about their future plans but you may find it helpful to do so for your own organisational and succession planning purposes.

Q          If I discuss retirement with an older worker can I leave myself open to a claim of age discrimination?

A          Not if properly handled. Employers may reasonably want to know about an employee’s future aims and aspirations. The important thing is not to single out older workers. If you are going to ask older workers about their plans it is good practice to also ask other, younger workers, about their plans as well, perhaps as part of an annual appraisal meeting.

Q          What can I say to an older employee at a meeting to discuss their future plans?

A          It is best if you start any discussion in a general way. Perhaps asking the employee what their future plans are or how they see themselves developing in your organisation over the next year or so. Any direct questions such as “are you planning to retire in the near future” or “you seem to have been slowing down of late, have you thought about retirement” are best avoided. Once an employee has indicated that they do wish to retire there is no problem in talking to them about the date for their retirement and any adjustments they may wish to make to their working arrangements or hours in the lead up to retirement.

Q          Can I protect myself by getting an employee to sign a contractual agreement that they will retire at a certain date?

A          There is nothing to stop you from coming to a contractual agreement with an employee about their future retirement date but it is unlikely to have any legal force. Employees cannot sign away their employment rights except in certain circumstances where they are legally advised and sign a compromise agreement. Compromise agreements can only be made however, where an employee has a case they can bring to an employment tribunal e.g. for unfair dismissal, which is unlikely to be the case in these circumstances as the employee will still be in employment.

Q          What can I do if an employee had indicated that they will retire on a certain date but then do not do so?

A          If an employee has given formal notice to leave, you are under no obligation to let them withdraw their notice. However if an employee tells you during a discussion that they are planning on retiring, they may change their minds before formal notice is given. Where an employee decides not to retire and no notice has been given, the first thing to do is to discuss with the employee their reason for not retiring. This can help to establish whether there is any issue that you, as an employer, might be able to help them overcome thus allowing them to retire on the due date or shortly thereafter. Ultimately however, if they decide that they do not wish to retire, for whatever reason, then you cannot compulsorily retire them as this will leave you open to a complaint of unfair dismissal.

Q          What do I need to do in terms of changing contracts, handbooks and employment policies?

A          Employment contracts will require reviewing to ensure that they are complying with the new legislation.  In addition the legislation will impact on a number of employment policies for example; retirement, and health and safety and therefore you should review and update your policies and the relevant sections of your Company handbook.

Further Guidance:

ACAS have worked on a 20 page document with the Government to assist businesses with dismissals after 1 October 2011 this is available from their website www.acas.org.uk

Contact People Business if you would like to discuss our fixed price options to update your contracts, employment policies and Company handbooks or if you have any questions about the DRA. Please email us at lisa.bolton@peoplebusiness.co.uk or call us on 01932 874944 or respond at http://people-insight.blogspot.com/

Working without the Default Retirement Age

Longleat staff over 65 made to retire: should other employers be following on Longleat’s footsteps?

 Longleat Safari Park hit the headlines recently for all the wrong reasons as it was revealed that all staff aged over 65 at the popular tourist attraction had been made to retire. The retired employees included 18 workers over 70, seven over the age of 75 and two members of staff in their 80s.

A Longleat spokesman denied the move was anything to do with the law change. In light of the timing, this seems unlikely. 

This newsletter is the first of three we will be sending you over the next three weeks to bring you details of this impending change in law and guidelines on how your Company can manage these changes.

With effect from 1^st October 2011, the Government will be removing the ability for you as an employer to fairly dismiss your employees who have reached the age of 65. From this date dismissal for retirement will no longer be a fair reason for dismissal. The Government says that termination should be through either discussion or capability. Older employees can still voluntarily retire at a time of their choosing and draw any occupational pension they are entitled to in line with the scheme’s rules. Removing the DRA does not mean that employees will never be able to retire. It just means that employers cannot force employees to retire at a set age unless the age can be objectively justified.

MANAGING WITHOUT THE DEFAULT RETIREMENT AGE

The Default Retirement Age (DRA) will be phased out from 6 April 2011 and no valid notices of retirement can be issued after 30 March 2011 as this is the last date on which a full six months’ notice can be given.  Notices given before this date will only be valid if the retirement takes place before 1 October 2011.

You can still use the DRA between 30 March 2011 and 6 April 2011 but if you do so you must use the short notice provisions, under which an employee could claim compensation (subject to a maximum of eight weeks’ wages).

At the moment, provided that the employer goes through a proper process by giving at least six months but not more than 12 months’ notice of their intention to retire employees who have reached 65 and offer them the right to be considered for an extension and go through an appeal process if the employer says no, then there can be no claim for unfair dismissal or for age discrimination.  After the DRA disappears, if you continue to retire employees your Company will risk age discrimination and unfair dismissal claims.

So what happens now? Window of time for retiring older non performing workers!

What has happened at Longleat is no doubt precisely what the proposals to abolish the DRA were designed to avoid. A statement from Longleat said that it was undergoing a "modernisation programme" and that is was "inevitable that we require people with new diverse skills and experience from a variety of backgrounds." 

Whatever an employer’s reason for retiring older staff, you as an employer should be acting now if this is something you wish to do given the forthcoming changes in the law.

From the 6 April 2011 employers will be left with two choices:

·         to stop using retirement ages altogether;

·         or continue to use retirement ages, but only where there is – what the Government is now referring to as – an "employer justified retirement age" (EJRA).

An "employer justified retirement age" (EJRA)

Employers will not be able to defend any claims for age discrimination or unfair dismissal, unless they have an EJRA. An EJRA must be objectively justified by reference to a genuine business need (for instance workforce planning, the need for business to recruit, retain and provide promotion opportunities and effectively manage succession) or the health and safety of individual employees, their colleagues and the general public.  Employers may find it difficult to establish an EJRA.  To rely on an EJRA, employers will need to explain and provide evidence to support the reason for having a retirement age at all, as well as the age that is chosen, and will also have to tolerate the uncertainty of not knowing whether the EJRA can be justified until tested at Employment Tribunal. The prospect of being one of the first cases in which the courts will decide what can amount to an EJRA is unlikely to be appealing for most!

However if an EJRA is established, employers should also follow a fair procedure in retiring people at the compulsory retirement age. You should give the employee adequate notice of impending retirement and, if circumstances permit, consider any request by your employees to stay beyond the compulsory retirement age as an exception to the general policy – although it would be important in such circumstances to ensure consistency of treatment as between employees who might request to stay on.

Further Guidance:

Look out for our second newsletter next week which will focus on managing performance and retirement within the new legislation and talk you through some frequently asked questions (FAQ).

Contact People Business if you would like to discuss our fixed price options to update your contracts, employment policies and Company handbooks or if you have any questions about the DRA. Please email us at lisa.bolton@peoplebusiness.co.uk or call us on 01932 874944 or respond at http://people-insight.blogspot.com/