Employers fear abolition of default retirement

The UK Government’s review of the UK’s default retirement age (DRA) is now anticipated to result in its abolition rather than an increase. Harriet Harman has voiced her support for abolition and yesterday the Equality Commission backed Ms Harman.

In its view, the DRA is obsolete and discriminatory. However, abolition is unpopular with businesses, with 70 percent of employers recently surveyed by international law firm Davies Arnold Cooper in opposition. In contrast, opinion was almost equally divided when asked about support for an increased DRA, 45 percent in favour and 55 percent against.

“The message from UK businesses is that abolition of the DRA concerns them.

They are worried that the implications haven’t been properly considered,” said Wendy Trehy, partner and employment law specialist at Davies Arnold Cooper.

Employers expressed a number of concerns – many respondents were concerned about the potential performance of employees past 65 and what they would need to do in order to manage this.

A further concern was that without a DRA, employers will have to put their older employees through a formal performance review procedure and ultimately terminate their employment on grounds of poor performance or capability, which would mark a sour end to the employment relationship. Employers are also concerned about the implications for workforce planning and the impact on development and promotion opportunities.

The survey found that almost 85 percent of businesses currently use the DRA as their contractual retirement age. Employers with a lower retirement age primarily do so for health and safety reasons, but interestingly a small number already have no retirement age. The majority of employers have received requests from employees to work beyond their contractual retirement age and have approved the majority of two of those requests.

Only 12 percent have refused all requests while most have approved all or most of the requests received. In the vast majority of cases, the reasons given by employees for requesting to work on were because they still enjoyed their job

(79 percent) and for financial reasons (75 percent) – reasons that mirror the arguments put forward both by Ms Harman and the Equality Commission.

“The responses also show that many employees beyond the age of 65 retain the desire to work and can provide a valuable contribution in doing so,” said Trehy. “However, while many employers recognise the need for change and accept that the DRA is out of date, many are concerned that abolition is a step too far and will have negative consequences for both them and their workforce.”

About the survey

The survey was conducted in December 2009. The questionnaire was completed by 45 respondents at leading private-sector companies in the UK

8 February 2010