Business Law

Retirement

Retirement is a thorny issue at the moment.  There are conflicting policy considerations when a business wishes to introduce new blood, but in these days of financial constraint, cannot increase their staffing levels.  To require older employees to retire at 65 is one way to keep a turnover in the work force, but employers are obviously concerned regarding issues of age discrimination.  Added to this the Government’s wish for us to work longer, but with youth unemployment on the increase, how do industry and business make space for younger employees?

Currently, the national retirement age is 65.  This means that as long as an employee’s contract gives no specific retirement age an employer can require employees to retire at 65.  If the contract gives a lower age, the employer has to justify why they wish to retire employees below the age of 65.  If the contract gives a higher age, the employee is entitled to work to that higher age as a contractual right. 

However, the default retirement age is to be abolished with effect from 1st October 2011.  It is being phased out from 6th April 2011. 

Whilst this might seem too far in the distance to be of concern now, employers must start planning at this point.  The Employment Equality (Age) Regulations 2006 require an employer to give between 12 and 6 months’ notice of their wish to retire an employee at 65.  Employers will no longer be able to require retirements occurring from 1st October 2011 onwards, so any notices will need to be given by 30th March 2011, to expire no later than 30th September 2011.  If a notice is given any later, it will be void.  If an employer has an employee whose 65th birthday occurs between now and 30th September 2011, it will need to give them formal notice at least six months before their 65th birthday date, or they may not be able to require the employee to retire. 

Employers must follow the proper procedure.  This involves giving written notice of the intended retirement date and advising the employee of their right to request to work beyond the age of 65.  If the employer makes a request to work beyond 65, the employer must arrange a meeting to discuss this request.  Employees have the right to be accompanied to the meeting by a work colleague. 

If the employer decides they wish the employee to retire, the employee can appeal that decision.  The employer must hold an Appeal Meeting. 

If the proper process is followed an employer can legitimately retire an employee at the default retirement age of 65.  However, employers must now keep a very close eye on the timing of the procedure. 

After the 1st October 2011 the default retirement age will no longer exist.  There will be no nationally set retirement age and it will be a matter for employers to objectively justify any retirement ages they set in their contracts of employment.  If no retirement age is given in the contract, individual retirements must be justified on a case by case basis.  The Government intends to issue guidance on retirement in 2011, which will obviously be extremely welcome. 

For further information please contact:

Marina Vincent on 020 8422 5678