A new age of employment?

Amid the policy proposal whirlwind of its first 100 days, the Coalition’s plan to scrap the default retirement age (DRA) promises real and lasting impact on the UK’s employment landscape. The scope for retirement dismissal at age 65 to remain lawful will become significantly curtailed from October 2011, and, with that change, people over 65 will have enhanced employment rights.

For the Government, the benefits of abolishing the DRA are obvious. Whilst ticking fairness and equality boxes it will provide a better fit for the UK’s aging demographics and boost public finances with additional tax revenues.

Despite an enthusiastic welcome from campaigners, the plan has thus far received a cool reception from employer groups. The CBI warned of its ‘many unresolved problems’ while the Institute of Directors bewailed employers’ loss of flexibility in managing their workforce. Yet however knee-jerk their initial response, employers will undoubtedly find themselves facing new obligations – for which they’ll have to adopt a completely fresh mind-set.

With retirement dismissals, just getting the process right will no longer be enough. Any employer operating a compulsory retirement age will need compelling reasons that will stack up against an age discrimination and unfair dismissal claim. So in the early stages, only the brave or foolish will pursue compulsory retirement for any employee keen to keep working.

In this context, performance management will become critical. With employers no longer able to bide their time until employees reach 65, consistent appraisal and review will be the only way to get ineffective staff back on track, or in the extreme, provide grounds for dismissal.

Smart employers will recognise this by stepping up performance management training and offering flexible retirement options - where over time, employees can progressively work fewer days every week.

One such employer is Nationwide Building Society. It actively campaigned for the DRA to be removed. In fact since 2005, subject to what its HR Director calls a ‘gateway test’, it has allowed employees to continue working up to the age of 75. Now, out of an approximate 15,500 employees, it has 285 over the age of 60 working in all areas of the business.

Thinking differently about succession and planning has driven Nationwide’s success here. Finding effective ways to tap into the deep experience of mature staff while ensuring they don’t block progression for ambitious juniors is key. But surely this is what employers should be doing anyway. Scrapping the DRA removes an all too easy get-out clause for those simply too passive to deal with poor performance or create motivating career paths.

With the UK’s ever-aging population and workforce, not to mention our huge national debt, resisting DRA abolition will be pretty futile. Far better for employers to get their heads around these issues now and face the new age employment landscape head-on.

For further information please contact Paula Morris. T: 029 2047 4401 E: p.morris@capitallaw.co.uk

Click here to view our blog archive.