Plan to Scrap Forced Retirement Leaves SMEs Short of Time

Plan to Scrap Forced Retirement Leaves SMEs Short of TimeEmployers may not have enough time to prepare for the abolition of the default retirement age (DRA) if the Government keeps its October 2011 deadline, say business groups.

Such a rapid introduction of the new law would leave “complex legal and employment questions” unanswered and “open the door to tribunals”, according to the UK’s leading small business organisations. It would also deny small firms the opportunity to plan adequately for staff changes.

“The Government’s timetable to scrap the DRA will give companies little time to prepare,” said Confederation of British Industry (CBI) deputy director-general, John Cridland.

“It will leave a vacuum and raise a large number of complex legal and employment questions, which the Government has not yet addressed,” he added. “We’ll need changes in the law to deal more effectively with difficult employment situations.”

Employers can currently compel staff to retire at 65 — although workers have the right to request to continue working beyond that age. Firms can also set their employee retirement age above or below 65 if they can justify the change.

However, in May 2010, the Government pledged to phase out the DRA. It has now launched a consultation, proposing to scrap forced retirement notes from April 2011 and get rid of the default retirement age from October 2011.

Forum of Private Business spokesman, Chris Gorman, said the speed of change would make it tough for small firms to comply.

“The move could open the door to costly and painful employment tribunals, as an employer’s only means of ending employment will be through a capability dismissal, based on the declining competency of the worker,” he said.

British Chambers of Commerce director of policy, Dr Adam Marshall, added:

“Businesses value the skills and experience of older workers and most do keep them on. But they also value the freedom to manage their workforce.

“Ministers should either raise the DRA in line with the state pension age, or offer employers a new dismissal route that helps businesses manage their workforce more efficiently, regardless of age,” he continued.

A Government impact assessment suggested that employers will save £45 million in the first year after the DRA is scrapped. It also found that more than half of small firms with fewer than 25 employees already allow workers to remain beyond 65.

Launching the consultation, minister for employment relations, Ed Davey, said:

“Older workers bring a wealth of talent and experience and have a vital contribution to make to our economic recovery. If they want to continue working, they should have that choice.

“The Government is committed to giving employers help in adapting to the changes, which is why it is important for them to have their say,” he added

Plan to Scrap Forced Retirement Leaves SMEs Short of Time

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