Retirement ages: On the scrapheap?

Following changes to the law last year, many employers now face uncertainty about how to manage the exit of their older workers. This is an important part of workforce planning which has an impact across all age groups in the workforce. Adele Cox considers the problems and offers some suggestions for employers.

There was a significant legal change for many workplaces on 6 April 2011, when the ability for employers to require their employees to retire at age 65 – the so called default retirement age – was abolished.

For employment (as opposed to pension) purposes therefore there is no longer any legal concept of ‘retirement’ and forcing an employee to retire is likely to be both age discrimination and unfair dismissal.

The theoretical consequence of this is that employees can carry on working indefinitely until they choose to stop working, at whatever age that may be. At such point they have to terminate their employment by resigning just like any other employee who is moving on.

An individual’s attitude to giving up work is likely to come down to personal factors and in particular their financial situation. For those who have a good level of pension provision the choice is likely to be an easier one to make than for those who simply cannot afford to retire. As people are generally having children later in life, or perhaps starting second families later in life, the need to maintain income could be paramount.

Limited scope for maintaining a retirement age

The so-called ‘employer justified retirement age’ provides limited scope for employers to maintain a retirement age for all or some parts of their workforces. This could be age 65 or may be a higher or lower age.

The important point is that such a retirement age is only lawful where an employer can show that the retirement age they have chosen is "…a proportionate means of achieving a legitimate aim".

This is sometimes referred to as ‘objective justification’. The test for objective justification is notoriously difficult to satisfy and will involve compiling extensive evidence to support the argument. Even then, an employer cannot be certain that such evidence will stand up in court.

Firstly, an employer will need to identify the legitimate aim or aims for forcing employees to retire at the retirement age. This might be for example, for health and safety reasons; to promote the recruitment and retention of younger employees; or to assist workforce planning.

Having identified its legitimate aim an employer must then show that the retirement age it has chosen is a proportionate way of achieving that aim. This involves balancing the discriminatory impact on the individual of being forced to retire against the legitimate aims being pursued by the employer and demonstrating that there are no less discriminatory ways of achieving that aim.

There is a fair amount of case law on retirement ages at both the domestic and European level.  Unhelpfully, there seems to be a divergence of approach, with the European court unusually taking a more relaxed attitude to the lawfulness of retirement ages than the domestic courts have so far.

However, these cases are all highly fact specific so it is extremely difficult to know whether a particular objective justification argument will stand up to scrutiny by a tribunal.

Fairly terminating the employment of older workers going forward

Given the uncertainty of being able to establish objective justification for an employer justified retirement age, many employers simply removed fixed retirement ages across their organisations last year.

But in those circumstances, how can employers fairly manage out older employees? In short, they must rely upon the existing ‘fair reasons’ for dismissal, such as capability (both health related and performance related), conduct, or redundancy.

It is envisaged that capability will be the most common reason relied on by employers from now on in order to dismiss older employees.

However, this is likely to be problematic for those employers that have not previously performance-managed their workforce adequately (or at all). Many employers do not have a culture where performance management has been taken very seriously as it can be a lengthy and time-consuming process.

It is also worth pointing out that certain employers or types of jobs may not actually see any significant decline in performance with age and in these cases it will not be possible to rely on capability as a reason for dismissing older employees.

ACAS has published non-statutory guidance – Working Without the Default Retirement Age – which seeks to provide advice and recommendations for organisations in terms of managing their workforce.

The guidance suggests that employers should engage in workplace discussions about career aspirations and plans with all employees on a regular basis (perhaps as part of yearly appraisals) regarding the employees’ short, medium and long terms plans with a view to finding out about their intentions at an early stage. These should be had across the whole organisation, so that older workers are not receiving greater scrutiny than others. Only asking older workers about their future plans could in itself be age discriminatory.

Whilst it will certainly be good practice to engage in these sorts of discussions, realistically, there is a risk that employees may not wish to divulge their plans due to the risk they may be sidelined by their employer or simply left to ‘trundle to retirement’ once they have made this fact known.

Additionally, even where an employee indicates that they may wish to retire in a few years, they will be able to change their mind up until the point that they have actually given notice to terminate their contract and their employer will not be able to do anything to force the employee to actually finish work (unless there are any other genuine reasons unconnected to age, as outlined above).

The stereotypical assumption that older workers are more likely to be ill or disabled may not stand up to scrutiny but employers should remember their duty to make reasonable adjustments for those who are “disabled” within the meaning of the Equality Act 2010. As the workforce ages this could put added strain on employers’ resources.

Employers should also beware of using redundancy exercises as an ‘easy’ means of terminating the employment of older workers. Any selection criterion which disproportionately singles out those of a certain age group is likely to be age discriminatory.

Recommended approach to take

A sensible approach to dealing with this issue would be for employers to carry out a thorough review of any existing performance related policies and procedures and to amend these where necessary; to retrain managers in terms of implementing these policies (because they are only as good as the managers who implement them); and to then rigorously adopt these processes internally.

This may involve changing the culture within an organisation with regards to performance management. It is also advisable to deal with any performance related issues as soon as it arises, so as to ensure practices are applied consistently, regardless of age and to avoid scope for allegations that older workers are being ‘singled out’. It may also involve organisations changing their mindset about the contribution that older workers can make to an organisation.

Finally, it may also be beneficial for organisations to support employees by offering free access to advice on financial planning for retirement. This will provide employees with vital information about their retirement income which may also help them to make important personal decisions.

Whilst this will clearly come at a cost for an organisation, it may focus employees’ minds on the key factors to be considered when deciding whether to retire at a given time.

Adele Cox is an associate in the employment team at Shoosmiths. She can be contacted on 03700 86 4226 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..