Firms warned of legal fights as default retirement axed

Published on Thursday 29 July 2010 19:03

PLANS to scrap the default retirement age would be "bad for business" and cause major problems for Scottish companies, industry leaders and employment experts have warned.

The claim was made after the UK government said it wanted to stop employers dismissing staff because they had reached the age of 65.

Employers can currently force staff to retire at 65 regardless of their circumstances and without having to pay any financial compensation. But under the government's consultation proposals, the default retirement age (DRA) would begin to be phased out from April 2011 and come to an end by October next year.

A leading business group claimed that not having a fixed retirement age would create "uncertainty" among employers and workers alike and would make it harder for firms to plan for the future.

John Cridland, CBI deputy director-general, 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."

Mr Cridland said the plans could make the provision of some employee benefits, such as critical illness insurance, "next to impossible".

He added: "In certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone."

An Edinburgh-based employment law specialist claimed that the proposals would disadvantage businesses.

John Lee, head of employment law at the legal advisers MBM Commercial LLP, said: "It's probably bad for business and will make it difficult for firms with sizeable workforces who have to plan for the future. Businesses won't be able to tell when an employee is leaving them. "The previous position was that an employee was able to agree an extension when they reached 65.

"The government's proposals are being sold as something that would allow workers to continue, but they are free to agree to work beyond the age of 65 under the existing arrangements.

"These proposals would make it much more difficult for businesses to work on long-term pension deals, for example."

However, UK ministers the move would give people more choice as they enjoyed longer and healthier lives.

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.

"Older workers bring with them a wealth of talent and experience as employees and entrepreneurs. They have a vital contribution to make to our economic recovery and long-term prosperity."

Scrapping the fixed retirement age would also see people paying tax for longer, at a time when Britain needs to cut public spending to address a record budget deficit.

Scotland's largest charity for older people welcomed the proposals, which it would mean there was more choice for employees aged over 65.

Lindsay Scott of Age Scotland said: "We've been campaigning on this issue for years, as traditional notions of retirement are long gone.

"A lot of people approaching retirement don't want to be told that they can't work any longer.

"One important issue is that the state pension is the lowest in the developed world and many people have no choice but to work on.

"Obviously we don't want people to have to work until they drop and people should be able to retire at the age of 65. They should have a choice about working past 65 if they want."

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