Scrapping Default Retirement Age May Be Costly

More than half of small firms are unprepared for the scrapping of the default retirement age (DRA) and the extra costs this may bring, the Employment Law Advisory Services (ELAS) has warned.

From 1 October this year, the DRA will be abolished and businesses will no longer be able to force staff to retire when they reach 65.

However, the ELAS survey of 1,000 small and medium-sized enterprises found that most were ill-equipped to deal with the practical implications of the new law — such as the rising cost of private health insurance or the workplace adjustments needed for those with disabilities.

More than half of respondents (57%) admitted they were unaware that costs for death-in-service benefits and private healthcare were likely to soar for workers aged 65 and over. In addition, 54% said they would be unwilling to honour staff benefits if costs rose, indicating that older employees could end up being worse off.

ELAS’ head of employment law Peter Mooney said most small firms were aware of the new legislation and when it was due to take effect, but many were still struggling with how to apply the new rules.

“It seems many businesses haven’t actually thought through how the new law will affect them in practice. Expensive death-in-service benefits and healthcare benefits are just two examples of how employing older workers will affect businesses. Risk assessments, access requirements and adjustments for disability may also need revision as workforces grow older.”

The British Chambers of Commerce (BCC) said the removal of the DRA made “workforce planning” much more difficult for small businesses.

“Many don’t know what to do in terms of pension liabilities or health benefits which could end up being quite prohibitive for small firms.”

said Dr Adam Marshall, BCC director of policy and external affairs.

“There are also fears around disciplinary procedures in the case of underperforming older staff — businesses are understandably concerned about discrimination claims if they are seen to treat older workers differently. Our advice to any business in doubt is to seek professional HR or legal guidance before taking any action, rather than face a potentially expensive tribunal.”

Scrapping Default Retirement Age May Be Costly

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