With the approaching abolition of the national default retirement age of 65 on 6 April 2011, we have compiled below answers to some of the most frequently asked questions about compulsorily retiring your employees.
Q: When will the default retirement age be abolished?
The default retirement age of 65 is effectively being abolished from 6 April 2011, although there are transitional arrangements (detailed below) which mean that some people may be lawfully retired under the old rules after that date.
Q: What is the current law?
Currently, employers may compulsorily retire any employee who is due to turn 65 or is already 65 or over by issuing that employee with between 6 and 12 months’ notice of their intention to compulsorily retire the employee. The employee has a right to request to work beyond that date and a right of appeal if that request is refused. However, if the employer fully complies with the procedure, the employee cannot succeed in claims for either unfair dismissal or age discrimination, arising out of the retirement dismissal.
The only exception to this is where the employer has a normal retirement age of over 65. In that case, the employer is not able to compulsorily retire an employee until they reach the normal retirement age.
Q: What is changing?
The default retirement age of 65 is being abolished altogether and the procedure detailed above for compulsorily retiring employees is also being abolished at the same time.
Employers who want to compulsorily retire employees who are not caught by the transitional provisions below will only be able to do so if they are able to objectively justify retaining a compulsory retirement age.
Q: Which employees can be retired under the current law?
Providing the statutory retirement procedure has been followed, employees who are already 65 or will have turned 65 by 30 September 2011 can be retired under the current statutory procedure.
Therefore, any employee who turns 65 on or after 1 October 2011 cannot be compulsorily retired under the current law.
Q: Until which date can an employee be given notice of retirement under the current procedure?
Under the current procedure, an employee must be given between 6 and 12 months’ notice of their intended retirement date. The final date on which such notice can be given is 5 April 2011.
Q: What is the latest retirement date under the current law?
If the maximum 12 months’ notice of intended retirement date is given on 5 April 2011, the last date on which an employee’s retirement can take place (unless the employer agrees to an employee’s request to work on) is 4 April 2012.
Q: Can the retirement date be extended?
Under the current law, an employer can extend an employee’s retirement date, upon the employee’s request, by a maximum of six months without the need to re-start the retirement procedure from scratch.
Therefore, if an employee who was lawfully given the latest possible retirement date of 4 April 2012 under the current procedure requested to work on, they could be given an extension up to 3 October 2012 under the initial procedure. This is the latest possible date on which anyone could lawfully be retired under the current law and of course, the latest possible date will fall earlier where the initial retirement date is earlier than 4 April 2012.
Q: What if an employer wants to keep a compulsory retirement age after the current procedure has been repealed?
If an employer operates a compulsory ‘employer justified’ retirement age after the law changes, it will be for the employer to show that the retirement age is objectively justified. Employees will be able to test this in the employment tribunal by claiming unfair dismissal and/or age discrimination.
The employer must be able to show that having a particular retirement age is a proportionate means of achieving a legitimate aim. This is likely to be more achievable in relation to safety-critical jobs or where there is a demonstrable need to retire employees in order to provide a career path for more junior employees.
Q: What if an employee over 65 is underperforming? Can they be retired in these circumstances?
No. Unless a company has an ‘employer justified’ retirement age, an underperforming employee, or any other employee for that matter, cannot be retired after the abolition of the default retirement age.
Employers will therefore be forced to deal with any performance issues for employees over 65 in the same manner as they would deal with performance issues for employees under this age. In order to fairly dismiss an employee in these circumstances, it is crucial that a fair capability procedure has been followed.
Q: Can employees still retire voluntarily after the abolition of the default retirement age?
Yes. The Regulations do not affect an employee’s right to retire voluntarily.
Q: What about providing benefits to older employees?
One exemption in the new law is to allow employers to withdraw group risk insured benefits (eg health insurance, life assurance, etc) for employees aged 65 or above. The age at which this exemption applies will increase in line with increases to the state pension age.
However, other benefits which are not insurance backed, such as employer’s pension contributions, will in most cases still require to be provided after the employee turns 65.