Business leaders attack Government plans to end compulsory retirement age

The Government came under attack from business groups today after announcing plans to phase out the so-called default retirement age (DRA) of 65 by October next year.

It was warned that the move could increase employment tribunal claims from older workers.

Ministers said the DRA will be "consigned to the history books", drawing praise from campaigners who have complained that forcing someone to retire just because they reached 65 was discriminatory.

Employment Relations Minister Edward Davey said: "With more and more people wanting to extend their working lives, we should not stop them just because they have reached a particular age."

But after studying details of today's announcement, business groups criticised the move, complaining that the timescale will give companies little time to prepare.

Adam Marshall, director of policy at the British Chambers of Commerce, said: "The Government has pledged to reduce the burden of employment law, but at the same time it is proposing to restrict businesses' ability to manage their workforce by phasing out the DRA.

"Many small and medium-sized firms value the DRA as it triggers a conversation about an employee's future and provides both sides with an opportunity to plan. Companies value the skills and experience of older workers and most do keep them on. But they also value the freedom to manage their workforce.

"Employers agree that the DRA is currently too low and needs to rise for both economic and demographic reasons. However, if ministers want to make a positive change, they 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 effectively, regardless of age."

CBI deputy director general John Cridland said: "The decision to abandon the DRA leaves business with many unresolved problems, and the Government's timetable to scrap it will give companies little time to prepare.

"Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed.

"This will create uncertainty among employers and staff, who do not know where they stand. There will need to be more than a code of practice to address these practical issues; we will need changes in the law to deal more effectively with difficult employment situations.

"For employers, these proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible.

"A default retirement age helps staff think about when it is right to retire, and also enables employers to plan more confidently for the future. In certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone."

The Engineering Employers Federation also criticised the "short" timescale, warning that manufacturing firms would not have enough time to prepare for such an important change.

The group also told ministers that the change could lead to an increase in employment tribunal claims from older employees who believe they have been unfairly forced to leave their job.

David Yeandle, the EEF's head of employment policy, said: "Manufacturers also need an explanation of what they feel are contradictory messages from the Government.

"On the one hand, employers are being encouraged to take on more young people to reduce youth unemployment but, on the other, the Government is making it more difficult for employers to plan for changes in their workforce by phasing out the default retirement age.

"Many manufacturers will be seriously concerned about this change in policy, which will make workforce planning more difficult.

"The proposed timetable also gives employers virtually little or no time to alter their policies and practices before such an important change in employment legislation is introduced.

"There is also a real danger that it could open a Pandora's box, with the onus being placed on employers to prove whether older employees are capable of continuing in their current role.

"Inevitably, this could lead to employment tribunal cases from some older employees who have been dismissed rather than allowed to retire."

Paul Mander, partner and head of employment at Dawsons Solicitors, said: "Many employers will be deeply concerned by the announcement.

"Up until now, employers have relied heavily on the default retirement age to enable people to retire with dignity or to remove the older workers who they feel are underperforming.

"Removing the DRA of 65 will give employers a major headache, and will force them radically to alter how they manage their workforce."

Pensions Minister Steve Webb said: "Many older people want to work after age 65 and have a wealth of skills and experience that are not being used. We want to get rid of the default retirement age so that if they want to work they can do so.

"By spending longer in the workforce, they can also have a better pension in retirement.

"Although the Government is proposing to remove the DRA, it will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it. Examples could include air traffic controllers and police officers."

TUC general secretary Brendan Barber said: "This is a welcome move. It cannot be right that workers lose their protection against arbitrary dismissal overnight because of their age.

"But we need to go further to give people real choice about how and when they retire, with new rights for flexible working. This can end the retirement cliff-edge where people work full-time one day and stop work the next. Many would prefer a phased retirement."

Rachel Krys, campaign director of anti-ageism group the Employers Forum on Age, said: "This is an incredible leap forward on employment practices and great news for individuals.

"After years of campaigning, the law will finally reflect the fact that it is fundamentally discriminatory to force someone to retire just because they reach 65.

"The default retirement age, which was created in 2006, is a dated and unfair system.

"Its removal is simply common sense. With rising life expectancies, and people staying fitter for longer, it is archaic to assume that someone's age is an indicator of the contribution they can make to the workplace."

John Walker, chairman of the Federation of Small Businesses, said: "Many small business owners have no intention of putting in place a blanket policy to retire their staff at 65 - they understand the valuable contribution and skills that older workers bring to the business.

"So the proposal to scrap the default retirement age is welcome news.

"Research by the federation shows that 60% of small firms do not think the Government should set a default retirement age and nearly eight in 10 small businesses said they do not use the default retirement age for their staff."

Graeme Leach, director of policy at the Institute of Directors, said: "We greatly regret the Government's decision to abolish the DRA. We do not see how the removal of a mechanism that gives employers flexibility in managing their workforce is compatible with the Government's stated desire to boost enterprise and deregulate the employment arena.

"Instead of removing one of the few flexible mechanisms left to employers, the Government should be examining how it can make it easier for businesses to employ people so that jobs lost in the public sector can be replaced with jobs in the private sector."

Michelle Mitchell, Age UK charity director, said: "We have fought a four-year campaign to achieve this historic decision so Age UK is absolutely delighted that the Government is finally setting a clear date for the abolition of this arbitrary and unfair law.

"This is a huge victory for hundreds of thousands of employees who are at risk of being forced out of their jobs simply because of their age. The Conservative and Liberal Democrat coalition deserves full credit for turning their commitment to fairness into practice.

"Everybody stands to win from scrapping forced retirement. People over 65 will have full employment rights for the first time. The economy will benefit from older workers' precious skills and experience and their increased buying power.

"Public finances will receive a boost from more people paying taxes for longer."

Baroness Prosser, deputy chair of the Equality and Human Rights Commission, said: "We believe today's announcement will make it easier for businesses planning their workforce.

"It will simplify retirement planning from what is, at the moment, quite a bureaucratic process. Employers will now only need to assess the fitness and capability of their workforce, something responsible businesses will already be doing, giving everyone a level playing field."