Companies ‘want to set a retirement age’

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MORE than half of companies in Yorkshire would like to have a default retirement age (DRA) despite the Government’s decision to abolish them from April 2011.

A survey of 421 companies – more than a third of them from Yorkshire – carried out by law firm Irwin Mitchell showed that almost two-thirds had a DRA in place before April 2011, with most set at 65.

Of those, 81.6 per cent had decided to remove the DRA following the change in the law, which said an enforced retirement age could only be set if it could be justified as part of a defined business aim.

Tom Flanagan, national head of employment and pensions at Irwin Mitchell, said: “Although the DRA was removed in April 2011, the final stage of the transition period expired in October 2012 and it is still very much a critical issue and one that many organisations are still exploring.

“The law is clear that employment can no longer be terminated on the grounds of age alone. However, what continues to make it an ongoing and sometimes complex point for employers is that they still have the option to introduce their own DRA if they are able to justify it.”

The evidence obtained through the survey showed that more than half of the companies – 53.7 per cent – would still prefer to have their own default retirement age.

Irwin Mitchell found that most businesses had removed their DRA simply because the law changed – or, in the case of almost 13 per cent of them, because they were given legal advice to do so – even though they would have preferred to keep it.

The most common reason for wanting a DRA, given by 29.6 per cent of people, was that it helped to retain a balanced workforce. This was followed by 29.2 per cent of people, who said it provided clear promotion opportunities to younger members of staff.

With the DRA now not being used by many companies, concerns have been raised that they will turn to their performance management systems to “manage out” older employees.

Irwin Mitchell warned that any action taken against older employees could now be viewed as unlawful age discrimination as employers find an alternative way to remove them from the company.

The survey showed that more than three quarters of businesses had performance management procedures in place, but only one per cent had faced an age discrimination case in the last 12 months. Even fewer – just 0.7 per cent – expected to have to deal with one in the next year.

Mr Flanagan said: “Essentially, most discrimination claims begin with raising the ‘inference of discrimination’ from the employer’s actions. This is not a particularly high hurdle.

“The risk here is that employers are being encouraged to use performance management as a means of ‘managing out’ older employees, in the absence of a DRA.

“In many cases, it would not be difficult to argue that a more rigorous application of performance management to employees who, previously, could simply have been required to retire, is not actually a performance issue at all but is because of their age.

“There could be a more significant risk of age discrimination claims than many anticipate, particularly in the next two to three years, until more rigorous performance management becomes the norm.”

Irwin Mitchell said that those employers who would still prefer to have a DRA could – as long as they could justify it.

Mr Flanagan added: “It is possible to do so provided that the business has legitimate aims for having a DRA and that the DRA chosen is a proportionate means of achieving those aims.

“The difficulty for employers is being able to show that they did actually put their mind to both of these things and have the evidence to prove it.”