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Employers count the cost of the end of default retirement

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With less than a month to go before the abolition of the default retirement age (DRA), research from recruitment firm Search Consultancy reveals over half of UK businesses are set to be impacted by the new legislation, due to the age profile of their employees, with tens of thousands of businesses worrying about the cost of implementation, managing performance issues and the prospect of increased tribunals.

Search's 'Don't Mention the Pension' report , published yesterday, shows a quarter of employers have a policy of compulsory retirement for employees aged over 65. But from October 1st, employers will no longer be allowed to dismiss staff just because they have reached 65.

The increase in operational costs due to scrapping the DRA remains the top concern for UK plc, with a quarter (25%) estimating the cost will be upwards of £50,000 and over a third (37%) admitting they're not sure what the impact will be financially. Smaller businesses with a turnover sub £6 million are the most confident that costs can be capped at the £10,000 mark.

Across the board, SMEs - companies with a turnover between £6 million and £25 million - registered the highest concerns about the legislative upheaval, ranking operational costs as the main issue (46%), followed by performance issues relating to an ageing workforce (42%) and the risk of tribunal claims and industrial action (32 per cent). Commenting on the results,

Grahame Caswell, chief executive of Search Consultancy, said: "As businesses of all shapes and sizes have been gearing up for the abolishment of the DRA over the past six months, our 'Don't Mention the Pension' research shows that the impact on the bottom line is still the major concern. Given the current economic climate this isn't entirely surprising, but we would urge businesses to invest both the funds and time getting the processes right at the outset, rather than risking expensive legal action at a later date.

"Coupled with the introduction of the Agency Worker's Directive next month, this is a double whammy for HR directors who are still reeling from dealing with the likes of parental leave, pension reform and the Bribery Act. "Despite all this, only one in four businesses view the scrapping of the retirement age as needless red tape, with more hailing it as a welcome end to age discrimination."

Over half (54%) of corporate-sized companies, those with a turnover of between £25m-£55m, see the scrapping of the DRA as a positive, despite the fact that 44% expect costs of implementation to exceed £100,000. Whilst 58%of businesses felt that 65 or under is the ideal retirement age, over a third (38%) believe 66-70 is more fitting and 5% citing 70 plus.

Research was carried out amongst 200 UK businesses by BDRC Continental in March 2011.