April 4, 2013
Nearly half (47 per cent) of employers surveyed by global law firm Eversheds would like the Default Retirement Age (DRA) reinstated. Two years ago, on 6 April 2011, the Government changed the law to start phasing out the DRA. While the overwhelming majority (97 per cent) say their organisation no longer operates a mandatory retirement age, many report that the change in the law has had negative effects for their organisation: two-thirds cited difficulties in succession planning whilst just under half reported that opportunities were being blocked for younger workers.
Fewer than 3 per cent of the organisations now have a policy of mandatory retirement for their employees (compared with 69 per cent of those who took part in a similar study by Eversheds two years ago) but a third (34 per cent) feel the abolition of the DRA has had a negative or very negative impact on their organisation.
Professor Owen Warnock, partner at Eversheds said: “It is clear that, for most of those who took part in the study, it was the Government’s decision to phase out the DRA that provided the impetus for change: 72 per cent of those who respondents said they would still be operating a mandatory retirement age if the law had not been changed.
“This is consistent with the results of a survey we carried out two years ago, just before the DRA started being phased out. Back then a significant majority (69 per cent of respondents still had a policy of mandatory retirement for some or all of their workforce subject to an employee’s right to ask to stay longer.”
Since the phasing out the DRA an employer has to justify any decision to retire someone against their wishes to avoid falling foul of age discrimination and unfair dismissal laws and more than half (56 per cent) say the repeal of the DRA has led to an increase in the number of employees staying on beyond age 65 or normal pension age.
But the implications have included increased costs of redundancies and/or providing benefits (37 per cent), more management time having to be spent on performance management (29 per cent), whilst just over a fifth reported an increase in ill-health absence.
Added Owen Warnock: “The results do show that there have been some positive consequences. With fewer employees being forced to leave at a fixed age, a third of those who replied say the law changing has resulted in improvements in retaining important skills and knowledge within their organisation. There have also been savings on recruitment and training costs for 17 per cent of respondents, whilst 22 per cent reported savings in time spent dealing with retirement procedures.
“What’s more, the much-feared increased in age-related retirement claims, has not, according to the survey respondents, in fact materialised. Perhaps most interesting, however, is the finding that half of those who replied feel that the abolition of the DRA has made no real difference to their organisation. A significant proportion of this group is accounted for by organisations that say they would not have a mandatory retirement policy even if the DRA had not been abolished. ”
He advises that the chances of the DRA being reinstated under the present Government are slim, especially as its abolition was one of the very first employment law changes agreed by the coalition partners.
“Nor would a change in Government at the next election be likely to result in a revised approach given that reintroducing the DRA could be seen as undermining older workers’ ability to remain in the workforce at a time when it appears to have been widely accepted that people will generally have to continue working until later in life, due to changing demographics, longer life expectancy and the cost of funding pensions.”
By Sara Bean