Retirement Age Outrage for Businesses

The retirement age will be abolished next year, forcing businesses to keep ageing employees indefinitely.  Although a review of the retirement age was expected, the sudden announcement has shocked the business community.

Employment law firm Empire HR has been preparing more than 500 businesses throughout Scotland for the change, expected to come into effect in October 2011.

The current rules were generally viewed as a good balance between the wishes of an employee, and the needs of a business.  The abolition of the retirement age will effectively swing the balance in favour of the employee.

Although the motives behind the change are perhaps admirable, it’s inevitable that business owners will be left wondering how much more red tape the Government will pile upon them.

The changes mean businesses will bear the cost of keeping ageing employees, and all the associated risks.  Age and disability discrimination legislation mean it’s almost impossible to dismiss an ageing employee without risking a costly tribunal claim. Retirement was one of few certainties a business could rely on.

Designed to ease the burden on the state, the plans give employees longer to pay into their private pension, and the option to defer the age at which they may require financial support from the Government.

The business community has been quick to condemn the announcement.  Steve Cook, CEO of Empire HR said: “Businesses are already struggling with the red tape introduced by the previous Government.  It’s shocking that businesses are now expected to deal with yet more rules and regulations on the back of the current Government’s recent manifesto pledge to cut red tape.”

So what will this mean for businesses?  What will happen once an employee is no longer capable of doing their job due to age related health problems?  Empire HR has been providing specialist advice to clients throughout Scotland. Steve Cook explains: “In many cases the only option will be for a business to dismiss on the grounds of capability. These dismissals can be time consuming and lengthy due to discrimination legislation.  However, a tribunal claim can be financially devastating for a business.  It’s worth taking steps to avoid a claim if at all possible.”

Discrimination laws mean businesses need to make reasonable adjustments when an employee has health problems.  Therefore, a business may need to make an adjustment for an ageing employee before contemplating a dismissal.  For example, an employee who struggles to get up stairs may require a lift to be installed, or for their desk to be moved downstairs.

Empire HR is also advising business to consider the wider implications of the change. Mr Cook continued: “Businesses will also need to look at the long term picture.  They will inevitably be faced with an older workforce in the future, and will not be able to replace ageing employees with fresh talent so swiftly.”

“It is also questionable as to whether this will be a good thing for the workforce as a whole. There will be more people of working age, so where are all the extra jobs going to come from?  It would appear that older employees will be keeping their jobs at the expense of younger applicants.”

“It’s likely that the Government changes will actually backfire in the short term. Businesses can still retire those coming up to their 65th birthday this year.  Whereas they may previously have been open minded about permitting employees to continue working for a year or two, they will now be more likely to force retirement at 65 years due to concerns that if they don’t do it before October 2011, they never will.”

For advice and guidance on how the scrapping of the retirement age may affect your business, please call Empire HR on 01224 701383.