DRA approaches retirement

Employment lawyers predict that the cost of insurance benefits and redundancy compensation will increase for many employers as a result of the phasing out of the default retirement age (DRA).

The Department for Business, Innovation & Skills (BIS) confirmed last week that employers will no longer be able to compulsorily retire employees at 65 under DRA as of 1 October 2011. The DRA is to be phased out from 6 April onwards. This means that:

• from 6 April, employers can no longer issue any notifications for compulsory retirement under DRA; and
• between 6 April and 1 October, only people who were notified before 6 April and whose retirement date is before 1 October can be compulsorily retired under DRA.

Employers will continue to be able to operate a compulsory retirement age as long as they can justify it objectively. BIS offered air traffic controllers
and police officers as an example of this.

BIS has included an exemption for group risk insured benefits such as income protection, life assurance, sickness and accident insurance so that employers can continue to withdraw these when the employee reaches the age of 65.

ACAS has issued a 20-page guide for employers on the changes.
Employment lawyers said there was a lot for employers
to consider.

Rachel Dineley, age discrimination expert at Beachcroft, says: “The prospective cost to employers will vary considerably, depending on the nature of the organisation, age profile of its workforce and adequacy of pensions provision.

“In many cases it will lead to an increase in cost of both insurance benefits and redundancy compensation and there may also be a cost involved in making ‘reasonable adjustments’ when managing any potential disability issues.

“A key concern raised by the Confederation of British Industry was how an employer can manage an employee whose performance has started to decline – this will require careful management on the part of the employer, and while ACAS has produced guidance, the reality is that managers will need support and training to understand and proactively address problems where they arise. No ageist assumptions should be made along the way.”