Recent age discrimination legislation has introduced 65 as a default retirement age. But many employers have found a competitive advantage in removing the retirement age altogether. Helen Dallimore explores the issues.
Topic: Age discrimination
Where: Great Britain (similar laws apply in Northern Ireland)
Law stated as at: 24th October 2007
As all employers in the marketing and advertising sector will be aware, since October 2006 discrimination in the workplace on the grounds of age has been outlawed. The age discrimination legislation has also introduced a default retirement age of 65 and a retirement process for employers to follow. Providing employers follow this process, technically any dismissal on the grounds of retirement will be fair.
Whilst some employers have found this to be a useful tool in getting rid of their "dead weight" employees, others have found the process overly technical and have incurred heavy penalties for getting it wrong. This article looks at whether employers should remove the retirement age altogether and allow their employees to work until they decide to resign.
The Government's introduction of a default retirement age of 65 means that any employer who puts in place a normal retirement age of less than 65 will be discriminating against the older employees unless the retirement age can be objectively justified. In practice this will be extremely difficult to do unless there are genuine reasons, for example on health and safety grounds. As this is unlikely to apply to businesses in the marketing and advertising sector, such employers will probably be unable to get away with retiring employees under the age of 65 to make way for "fresh blood".
This means that employers in the marketing sector have a choice. They can either rely on the default retirement age to get their employees out at age 65 or above, or allow employees to retire when they choose.
Why should you keep a retirement age?
In practice employers with no retirement age in place could face the following issues:
- having to performance manage out old employees who are no longer adding value to the business. As most employers will be aware, performance management can be an expensive and time consuming process and will often not be commercially viable;
- a lack of dignity for employees who are performance managed out of the business, as opposed to being retired, which can have a knock on effect on morale for the remaining employees;
- a blockage of talent with older employees staying on and restricting space and resource to attract "fresh blood". This can be crucial to the fast moving marketing and advertising sector where fresh ideas are vital;
- client demand may be for "young vibrant" people to work on their accounts. This will not be a fair reason to discriminate against older workers and therefore the only way of fairly dismissing such workers will be to require them to retire age 65 or above;
- difficulties in contingency planning for the future;
- increased costs of providing insured benefits for older workers.
Why should you remove a retirement age?
In practice the technical retirement process employers have to follow to ensure a dismissal is fair has been the cause of headaches. Many employers, including B&Q, HBOS, JD Wetherspoon and Marks & Spencer, have therefore decided to remove their retirement age altogether. This approach has been proven to have real advantages, as follows:
- not having to follow a complicated retirement process and avoiding the difficulties of implementing the process in practice;
- not having the threat of age discrimination and unfair dismissal claims as a result of failing to follow the retirement process to the letter;
- not having to say yes or no when faced with requests to stay on beyond the retirement age and deciding whether to give reasons;
- freedom of choice and dignity for employees who decide when they want to retire which is good for morale and inspires loyalty;
- good PR as it shows that the business encourages a diverse workforce and takes its corporate responsibilities seriously; and
- few issues in practice with having an older workforce in any event as, in general, the majority of people decide to leave work as soon as possible to start enjoying retirement.
So should it stay or should it go in your business?
Before deciding whether to remove retirement ages altogether you should consider:
- is there a real issue of employees of a certain age wanting to stay in the business when they are no longer adding value?
- does your business benefit from having the technical retirement procedures in place?
- does your business have sufficient performance and appraisal procedures in place to rely on and enable it to dismiss unproductive employees regardless of their age?
Why this matters:
Whilst the arguments for removing the retirement age are compelling, employers in the advertising and marketing sector may still consider that having a retirement age is a useful way of dismissing employees of a certain age without having to rely on performance management. However, the law is currently under review and if, as some are predicting, the Government decides to scrap the default retirement age in 2011 altogether, employers who currently still function with a retirement age may have to learn to cope without it.