Dealing with retirement post 1 October 2011

Last year we saw the abolishment of the default retirement age; which has caused much confusion with employers particularly in respect to whether or not they would be justified in having a fixed age for retirement.

Employers now essentially have to either:

  1. Objectively justify a fixed retirement age; or
  2. Dismiss an older employee in the same way as an employee of any other age group.

This blog looks at the considerations your business should bear in mind when deciding upon a fixed age for retirement.

Should you fix a retirement age?

Having a retirement age may amount to less favourable treatment on the grounds of age therefore you will need to consider whether fixing an age meets a real business aim and will withstand the scrutiny of a tribunal.

You will need to show that the retirement age is;

(a)  a proportionate means of

(b)  achieving your legitimate business aim.

What amounts to a legitimate aim?

This is the first question the court will look at, analysing the case law so far the following are likely to amount to a legitimate aim:

–       Imposing a retirement age to allow younger members of a law firm to progress to partnership may be legitimate if supported by robust evidence that this was a proportionate way of managing the age make-up of the business to meet a real business need;

–       Imposing a retirement age to allow an older and less able employee to leave without the need to justify their departure and damage their dignity (careful consideration will need to be given at what age this will be);

–       Specific health and safety grounds which may form the basis of a legitimate business aim (for instance in aviation matters). However recent case law has suggested that a blanket ban preventing pilots over 60 from flying was contrary to international legislation. Therefore it seems that it is only in specific situations this justification can be applied;

–       Access to a state pension may justify fixing a retirement age at the state pension age, however it is not clear whether this is how case law will develop.

When is a legitimate aim, proportionate?

–       Where less discriminatory measures can be put in place or alternative criteria used (i.e. competency testing) then it is unlikely that the aim will be considered to be proportionate.

–       You will have to show that you considered alternatives to compulsory retirement as a way of meeting your business aim. For example where there is concern about retention of younger workers, you may need to consider offering flexible working across the workforce.

–       In respect to using the arguments of allowing an older employee retire with dignity, you will need some evidential basis that performance would drop off at the fixed age, so it’s clear that you have chosen that particular fixed age to avoid performance management. Further where you have sophisticated performance management procedures in place this may weaken your argument.

It is clear that unless you:

(a)  Have very clear business reasons for adopting a fixed age for retirement;

(b)  Have taken legal advice; and

(c)  Extensively examined and explored alternatives to having a fixed retirement age

Then the less risky approach is to have no fixed retirement age.

Dismissing fairly

Please do remember in the absence of a statutory reason for dismissal, employers will have to show that the dismissal was for a potentially fair reason and that a fair and reasonable procedure was followed.

Conclusion

As a none exhaustive checklist you will have to:

  1. Ensure your recruitment procedures are adapted and updated;
  2. Implement good performance management procedures;
  3. Amend and/or update employment contracts;
  4. Carefully consider reasons for maintaining a fixed retirement age;
  5. Seek legal advice in respect to whether certain benefits can still be withheld from employees aged over 65 (such as medical insurance).

If you are in the process of updating your policies on respect to retirement then why not contact Samira Ali for a no obligations consultation on 0113 350 4030 or alternatively at samira.ali@scesolicitors.co.uk.

Please note that the information in this blog is to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with me or other professional counsel before acting on the information contained here.