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How will changes in the retirement age affect my employment agreements?

How will changes in the retirement age affect my employment agreements?



Currently employers can force retirement on their employees at 65. However if the government has its way, from next October, they’ll no longer be able to. Put it down to more enlightened attitudes to age discrimination and flexible working practices. Or take the more cynical view that it’s a back door way to inject more money into the economy. Either way, it looks set to be a business reality.

In a new age of equality, it perhaps does seem archaic for someone who is productively performing on a Wednesday to be shown the door on a Thursday because they are one day older and have become 65. Age discrimination is already illegal in recruitment, training and promotion. Isn’t it time for it to become illegal in terms of retirement?

Nonetheless, it’s hard to tell a long-serving member of staff that they aren’t as productive as they once were and, without question, the default retirement age provides a face-saving way out of such unpleasant duties.

However, from 1 October 2011, you will no longer be able to use the DRA as a way to justify compulsory retirement.

So, now’s the time to embrace a sea change in attitude: for employers to accept the inevitable and appraise what attributes their older employees can continue to bring to the table.

But, without the certainty and the ability to plan that the DRA provides, just what are the key considerations for you as an employer of older staff?

  • Cost implications – In countries where the DRA has already been increased or abolished, employers report repercussions including the increased cost of insurance and benefits such as company car insurance, health insurance, life insurance, disability insurance and pensions. It will be worthwhile for you to analyse your staffing; estimate and plan now for any future rise in costs.
  • Succession planning – With older, more experienced employees staying in work longer, there will inevitably be less room at the top for upcoming talent. With fewer opportunities for promotion, it will repay your organisation to devote more time to succession planning, to ensure you keep your most valuable talent motivated and seeing a way forward. Prepare to offset the negative effect on the motivation of younger workers who may soon feel there is a lack of opportunity to progress.
  • Workforce planning – Without a definite date when employees will now be retiring, it will become essential to sit down with older staff to assess their wishes, needs and abilities and form a definite plan with each. Not only will this allow you to map a working future your organisation can depend on, it will help your older employees to work more productively, towards an eventual planned, positive, phased transition into retirement.
  • Flexible working – By knowing the needs and expectations of your older workers now, you could usefully consider and plan for the introduction of flexible working practices which segue together their needs to work more flexible hours, work part-time or to job share.
  • Positivity – This inevitable change is not all bad news, there are many positive aspects. There is little to say that productivity declines with age and clear evidence that older employees in fact offer a strong work ethic, absolute dependability and stability, as well as continuity, vast knowledge, expertise, experience, and invaluable ability as mentors to upcoming talent.

So, while the true impact of scrapping the DRA will not be felt until 2011 and afterwards, when the last compulsory retirements take effect, the choice for employers is now clear.

If you choose to continue shedding older employees, the onus will be on you to prove they are no longer capable of continuing to work in their current role, with the heavy personal and personnel toll such cases will provoke, as well as the associated costs of the inevitable employment tribunals.

Better by far, surely, to learn how to manage, embrace and celebrate an age-diverse workforce.