Thumbs down to retirement age change

GOVERNMENT plans to scrap the default retirement age next October have been criticised by the North West business community.

Under the plans employers would not be allowed to dismiss staff because they had reached the age of 65. Currently an employer can force an employee to retire at the age of 65 without paying any financial compensation.

Dr Brian Sloan, head of business and economic policy at Greater Manchester Chamber of Commerce, said the move would not be helpful to businesses.

He said the “We believe that the default retirement age should remain 65. Many employers already have processes in place that allow staff to work beyond 65, but the default retirement age provides a fail-safe. S

“Scrapping the retirement age at a time of high youth unemployment and slow economic growth is not helpful to business.”

Jack Stopforth, chief executive of Liverpool Chamber of Commerce said the move would be “problematic” for many small firms: “The legislation could bring a wave of costly and painful employment tribunals, as an employers’ only means of ending employment will be through a ‘capability dismissal’.

“If ministers want to make a positive change, they should either raise the Default Retirement Age in line with the state pension age, or offer employers a new dismissal route that helps businesses manage their workforce more effectively, regardless of age.”

The Knutsford-based small business pressure group Forum of Private Business said the move could be “highly damaging”.

Forum spokesman Chris Gorman said: “Removal of the default retirement age will cripple some small businesses by removing the tools that help them to plan for the future.

“Most employees are certainly competent enough to work beyond the age of 65 without a significant deterioration in their abilities. However, for those employees not willing to leave voluntarily, there will eventually come a time when the needs of the business will have to be considered. 

“In the absence of a default retirement age, the only viable option available to an employer is a capability dismissal based on the declining competence of the worker. We believe this would be an undignified and humiliating end to a career for most staff.”

Big business was not impressed either.

John Cridland, deputy director-general of the CBI said: “The decision leaves business with many unresolved problems, and the Government’s timetable to scrap it will give companies little time to prepare.

“Scrapping the Default Retirement Age will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed. This will create uncertainty among employers and staff, who do not know where they stand.”

Legal opinion also warned of an increased burden of compliance for employers.

Andrew Chamberlain, employment partner at Addleshaw Goddard in Manchester said: “In the absence of a normal retirement age, the focus will shift to robust performance management procedures.

“However, employers should not automatically assume that performance declines at a certain age.  Performance issues will need to be addressed consistently across the workforce, to avoid discrimination claims.”

Jim Lister, head of employment at Manchester law firm Pannone, added: “Businesses will still need to move out the same number a people as ever in order to promote and motivate junior workers.

“If that is not done by retirement, it will be done by harsher performance management. Less people will end their working lives on retirement, but more will be sacked for poor performance. Perhaps not everyone will think that is a good thing.”

John Hassells, employment law partner at Bolton-based KBL Solicitors said: “Employees are more likely to challenge future forced retirements and this is only going to result in increased costs and claims for employers”.

Chris Boyle, head of employment at Lancashire-based firm Napthens solicitors, said the news was good for employees not wanting to cease working at 65, but warned employers to start planning now.

“Businesses will have only a short space of time to prepare for the changes, and it is important to get good advice on how to incorporate any new legislation into employment procedures,” he added.