RETIREMENT – The New Rules from April 2011
There has been much media coverage about the changes to retirement over the last few weeks and we hope the following summary will clarify matters.
Default Retirement Age – (DRA)
Retirement has for decades been a means by which an employer could effectively force an employee to leave employment at a pre determined age – usually 65 though other ages have been applied. This is no longer possible following the abolition of the DRA effected 6th April 2011. This means that where an employee will be 65 years old on or after 1st October 2011, any dismissal by reason of retirement is likely to be both unfair dismissal and age discrimination – but see Transitional Arrangements below.
In certain circumstance Employers will still be able to operate a compulsory retirement age, provided that they can objectively justify it. In reality the chances of achieving this are extremely remote and if you believe you have justification you should obtain specific legal advice before applying it.
Employees 65 years old (or above) on or before 30th September 2011 can still be retired and this will not be unfair dismissal or age discrimination providing the employer has followed the “Retirement” procedure, and complied with the transitional arrangements.
THE INTENDED RETIREMENT DATE (IRD) MUST HAVE BEEN ISSUED BEFORE 5th APRIL 2011. It is not possible to issue an IRD now – it is too late!
The previous retirement procedures still apply for retirements during transition and this includes the employee having the right to request not to retire. Such requests must be in writing and be made no later than 3 months before the IRD stating: (a) that it is a request to continue working after their IRD; and (b) that they propose to continue working after their IRD, indefinitely or for a stated period.
Employers must consider the employee’s request. A retirement meeting should be held as soon as is reasonably practicable to discuss it at which they have the right to be accompanied by a work colleague or by a Trade Union Representative who is also employed by the Company. As soon as is reasonably practicable after the retirement meeting, the employee should be notified of the decision.
The decision letter should confirm whether employment is to continue indefinitely or state the new extended IRD. The absolute latest this can result in a fair dismissal on grounds of retirement will be 3rd October 2012 – but this does depend on when the initial notice of retirement was issued, how much notice of retirement was given and whether the employer agrees to a later date.
Remember the IRD can only be extended by a maximum of 6 months. If the Employer seeks to extend employment beyond 6 months, then the option to retire is forfeit and the employee’s open-ended employment continues indefinitely.
If the decision is not to fully accept the employee’s request, or the decision is to refuse the request, the Company will confirm that it still wishes to retire the employee and give the date on which the dismissal will take effect; the written decision should also set out the appeal procedure.
If an employee wishes to retire, and they have always had the opportunity to do this simply by giving notice, then this is in effect the employee resigning their employment.
The difficulty for employers will be that in circumstances where a long serving and hard working employee is beginning to fail in the job, or the job is becoming too arduous etc the very dignified way to resolve matters through retirement has all but gone. Employers are now faced with having to formally front-up their performance or capability concerns with employees and this will result in those very difficult conversations having to be had. For some we are sure it will leave a sour taste in the latter years of employment.
For further advice and guidance on how to manager your retirement procedure, specifically during the transitional period, or on related performance / capability management issues please contact Sentient on 08456 446 006.