Russell HR Consulting

The Government has just announced details of how it will remove the default retirement age (DRA) of 65 permitted by the age discrimination legislation. It proposes to begin phasing out the DRA from April 2011. The proposals are subject to a consultation, which will run until 21st October 2010.  Ministers want to know if there is a need for guidance or a formal code of practice to explain workers’ new rights and what impact they may have on benefits.

Rachel Krys, campaign director for the Employers Forum on Age (EFA), said, “This is an incredible leap forward on employment practices and great news for individuals.

Dianah Worman, Diversity Adviser at the Chartered Institute of Personnel and Development, added, “We are greatly encouraged by the new plans laid out to eradicate the DRA. Our research has shown that many employees wish to work past retirement for differing reasons and many employers are already benefiting from allowing such flexibility.”

These comments demonstrate a fundamental lack of understanding of commercial reality, which, amongst other things, is that in most cases good employees are kept on if they wish it. Employees who are unsatisfactory or have poor work performance may well be retired. At present an employer can retire an employee without hurting his feelings. Sometimes there are insurance-based benefits, which make the costs of keeping over-65s financially impossible. Unless properly addressed, the removal of the DRA will create yet more problems for employers, already struggling with the many challenges, risks (and enormous costs) of running a business. Yet we’re told industry is supposed to lead the UK out of the recession …

The cynical truth is that scrapping the DRA is less about the removal of discrimination than the Government’s need to keep income tax receipts up and reduce the burden on pension funds. The state pension age is due to rise to 66 in 2016.

While business leaders accept that removing the DRA is valid in principle, they have serious concerns about the adverse effect on business. At present we simply don’t have appropriate mechanisms for dealing with open-ended employment.

I heard John Cridland, Deputy Director-General of the CBI, on the radio and he made some very sensible points. Let’s hope the Government listens. Amongst them he pointed out that removing the DRA will leave businesses with a number of issues, which have not yet been addressed. These proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible.

Mr Cridland said that there will need to be more than a code of practice to address these practical issues; employers need some certainty and the Government will have to make changes in the law to deal effectively with difficult employment situations.

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