Employers can no longer force staff to retire at 65 after the Default Retirement Age met its end on 1 October – but has UK Plc really woken up the HR challenge ahead?
The Default Retirement Age (DRA) was introduced in 2006 at the same time as regulations (Employment Equality (Age) Regulations) intended to stop age discrimination in the workplace.
By the early 2020s, people aged between 50 and 64 will comprise almost a third of the workforce and companies will have to review their HR and recruitment policies to ensure they continue to stay within the law.
Tapping into a more mature workforce should be seen as a good thing, reckons Liz Field, CEO of the Financial Skills Partnership (FSP). “The experience and benefits older employees can bring to business should be harnessed,” she argues. “In these difficult economic times, older workers can add resilience to a business‚ workforce offering a vital blend of hard-soft skills that allow them to react in a more productive manner to economic crises.
“This group tends to be very competent and reliable, inherently understands employer expectations and usually do not require much additional training, although such training may need to be delivered in a more flexible way. In some ways this group actually beats their younger counterparts in areas like soft skills including; attitude, work ethic, teamwork ability, problem solving and commitment by using the total sum of their life skills and work experiences ˆ all of which are highly valued by employers.”
Field suggests that there are disadvantage to losing staff to earlier retirement ages. “If a company loses its ‘corporate memory’‚ it can have a huge impact on its business success. Both the economy and society we live in are changing and demand greater flexibility. The skills, past experience, customer knowledge and soft skills provided by older workers are therefore essential in enhancing a changing market.”
The FSP argues that untapped resources for company boards include older, experienced executives who are stepping down from their company roles who could bring vast experience as a Non-Executive Director (NED) while senior public service figures leaving through retirement or displacement are a source of valuable expertise elsewhere.
The latest employment figures show that the number of people aged 50 and over who have been out of work for two years or more has passed 100,000 for the first time – virtually double the figure for the same period in 2009. Meanwhile the proportion of over 50s facing long term unemployment is greater than for any other age group, highlighting the impact of age discrimination in the workplace.
Victory against prejeudice?
That seems to indicate that organisations are prejudiced against older workers despite official company policy, reckons Age UK whose director of charity, Michelle Mitchell says: “The end of the Default Retirement Age is a victory for older workers who for too long have been consigned to the scrapheap for no reason other than prejudice.
“With an ageing population traditional rigid ideas about retirement are changing. Many people will want to work longer for personal or financial reasons and prejudice should not lock them out of the workplace,” she adds. “We hope that, by taking away the arbitrary “best before” date for employers, attitudes towards older workers will quickly evolve to look at their skills and experience, not their date of birth.”
This is only a victory in a battle, warns Mitchell, the war goes on. “There is still a long way to go before older workers are treated as equals in the workplace. We have seen a very small improvement over the last five years but, as the statistics show, not nearly enough,” she explains “The government must continue to work with employers and trade groups to highlight the benefits of hiring older workers.
“And that message must trickle down to line managers who are responsible for day to day hiring and management. Older workers must be given improved access to training and back to work support to maximise their skills and appeal to employers. Otherwise, employers have an excuse to overlook a significant sector of the population when it comes to staffing.”
But Katja Hall, chief policy director of the Confederation of British Industry (CBI), insists the change in the law is actually counter-productive. “The government has dithered too long on this issue,” she argues. “The DRA was valued as it helped employers to plan ahead and manage changes to the workforce. We urgently need an effective new framework for retirement planning.”
John Walker, national chairman of the Federation of Small Businesses, said the organisation reckons the scrapping of the DRA could trigger costly legal battles. “This will add to the fears of more employment tribunals if an employer does need to dismiss an underperforming member of staff,” he warns. “The FSB believes that the default retirement age should be raised in line with increases to the state pension age to take into account an ageing population.”
At the expense of the young?
Meanwhile a new report to be published on Monday – A Retirement Revolution – Life After the Default Retirement Age – will warn that axing the DRA may trigger a drying up of opportunities for the UK’s younger workforce. A study by Norton Rose LLP found that 22% of employers surveyed think that they will have less ability to take on younger staff as a result of the change in the law while 46% expect that the changes will have a negative impact on their business.
It also seems that a significant number of firms will either actively resist the changes or are choosing to turn a blind eye for now. Of the 125 employers surveyed, 11% are taking legal advice on whether they can continue to enforce retirement, 10% are looking to incentivise retirement by offering a financial package while 76% have not given their line managers any additional training on how to approach the scrapping of the DRA.
“Employers are failing to negate the impact of the change on their ability to provide opportunities to younger workers,” argues Paul Griffin, London head of employment at Norton Rose LLP. “Too many are holding firm to rather blunt solutions, such as singling out older employees to talk about retirement, or simply attempting to continue to enforce retirement.
“Scrapping the default retirement age was a bold move although to some extent inevitable. There’s no doubt that workers have a significant amount to offer their employers after the age of 65, but the knock-on impact on employers’ capacity to take on younger talent could be profound. It’s an issue many feared would be sparked by the change.”
It’s essential that firms formulate a strategy around the end of DRA, he urges. “There’s a real danger for employers here. The fact of the matter is that the default retirement age in the UK will be no more,” he explains. “If employers want to ensure they stay on the right side of the law when it comes to retirement without harming their ability to take on younger workers, they need to find more thoughtful solutions.
“This isn’t a message that all employers are hearing, though our survey also shows that significant numbers are. Flexible working, performance management, redeploying talent, job sharing – these are all options that many employers are looking at closely. If more employers are going to ensure they have the capacity to bring on younger workers after the default retirement age ends, they need to take their lead from this enlightened majority.”
