· 3 min read · Features

Two choices face business, following abolition of the default retirement age

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Until recently, employers could retire any employee simply because they were aged 65 or over, pretty much without question.

The only provisos were, firstly, that before doing so the employer gave at least six months' prior notice and, secondly, that they gave due consideration to any request by the employee to work on. This was known as the default retirement age (DRA) and it provided employers with a great deal of certainty when it came to long-term business planning.

Although permitted by law, the use of the DRA did constitute discrimination on the grounds of age. As a result, and given the UK's ageing population and resultant need for many to work beyond the age of 65, it has now been abolished. Employers are now left with two options.

Option 1 - Have no fixed retirement age

The first option is to abandon the use of fixed retirement ages altogether and allow employees to remain in work for as long as they want, provided they remain capable of doing their job.

This may be the easier option in the short term (and the one adopted by the majority of employers), but the lack of certainty as to the timing of an employee's retirement will make long-term planning more difficult.

To counter this, employers should consider the use of regular appraisals and build into them discussions about future aspirations and short, medium and long-term plans to establish an employee's intentions. The encouragement and facilitating of robust pension planning will also be vitally important, as employees will now retire not just whenever they want to, but also whenever they can afford to.

Of most concern with this option will be the situation of a worker unable or unwilling to retire voluntarily and whose performance or health has deteriorated significantly. This would have to be dealt with in the same way it is for employees of all ages (ie by the appropriate disciplinary, sickness absence or capability procedure), meaning if the issues do not improve, they may be a justifiable reason for dismissal.

Such a dismissal would of course prove an undignified and acrimonious end to an otherwise distinguished career and carries the risk (and cost) of having to defend a claim before the employment tribunals, should the employee be particularly unhappy. Such risks can be minimised by adopting a proactive and robust approach to the management and measurement of performance and absence. This will allow concerns to be openly discussed and addressed at an early stage and, if matters fail to improve, establish evidence of the decline in performance or attendance should dismissal prove necessary.

It is crucial to remember that active management, whether retirement discussions, the encouragement of pension planning or the improved management of attendance and performance, must be carried out in respect of all employees, regardless of age, as to focus solely on older employees will in itself constitute discrimination.

Option 2 - Retain a fixed retirement age

The abolition of the DRA removes only the automatic and unquestionable right to retire an employee because they are 65 or over.

It remains open to employers to operate their own compulsory retirement age (whether that be 65 or any other age), but only if it can be objectively justified as being 'a proportionate means of achieving a legitimate aim'.

What does that mean? Unfortunately, case law to date is sparse and difficult to reconcile, but it indicates that 'legitimate aims' may include workforce planning (for example, to ensure recruitment opportunities within the business), economic factors such as the need for efficiency, or other factors such as health, welfare and safety.

To pass the proportionality element of the test, the discriminatory effect must be significantly outweighed by the importance and benefits of the stated aim and there must be no better, alternative way of achieving that aim.

If an employer opts to use a fixed retirement age, they must be ready to justify it should it ever be challenged. The issues would ultimately be determined before the employment tribunals, with the onus of proof lying squarely on the employer, who must set out clear and robust evidence that compulsory retirement (and the particular age adopted) is or was the most proportionate way of achieving the stated legitimate aim. That will not be an easy task.

Which to choose?

The removal of the DRA has replaced certainty with an element of uncertainty, whichever of the two options is adopted. Option one requires no immediate action, but improved management will be required throughout an employee's career (and in particular at the end of it) and it will introduce doubt as to the timing of a retirement.

Choosing option two on the other hand provides certainty as to the timing of that retirement, but uncertainty as to whether it will in future be challenged by an affected employee and, if so, whether it will stand up to judicial scrutiny.

John Norrie (pictured) is a solicitor specialising in employment law with Scottish Law firm Gillespie Macandrew