Ending Retirement Age Costly for Small Business, warns IoD

Retirement age ? why the Government has got it wrongGovernment plans to scrap the default retirement age (DRA) next October will force employers to make more dismissals and divert management time away from running the business, the Institute of Directors (IoD) has warned (Despite research to the contrary showing that Most SMEs Oppose Retirement at 65)

At present, employers can compel staff to retire at 65 — although workers have the right to request to continue working beyond that age. Small firms can also set their employee retirement age above or below 65 if they can justify the change.

But in May 2010, the Government pledged to start phasing out the DRA from April 2011 and subsequently launched a consultation calling on businesses to provide feedback on the proposals.

In a new paper Retirement age ? why the Government has got it wrong, the IoD has called on the Government to raise the DRA to 70 ? in line with average life expectancy.

The business group also warned that if the DRA is scrapped, employers will be forced to dismiss staff if they want to remove underperformers over the age of 65.

“Abolition would mean that for the first time thousands of retirements would have to be managed via the dismissal process,”

said an IoD spokesman.

“This has become excessively complex and protracted in recent years.”

Department for Business, Innovation and Skills (BIS) spokesman, Matt Baker, said:

“It’s arbitrary to kick someone out when they reach a particular age. It should be down to the abilities of an individual ? you can still get rid of someone if they are not performing, by performance management, through standard dismissal procedures. Employers should manage poor performance consistently for all staff, there is no need to manage performance differently for older employees.”

“It’s about giving people the choice when they want to retire. It’s given people flexibility and getting rid of a slightly discriminatory practice — the idea that just because you reach a certain age you are past it.”

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