Life after the DRA - what should you do?

What's changing?

The current process for dealing with retirement is fairly simple: Employers can fairly dismiss employees when they reach the Default Retirement Age, or DRA, without financial compensation as long as they have held a meeting with the employee 6 months before to discuss plans. With the Coalition government’s announcement last week that it has launched a Consultation process to remove DRA, things are about to get a lot more complicated...

What does it mean for my business?

The new plans will mean that from October 2011 employers are no longer allowed to dismiss employees because they have reached their 65th birthday. This may seem like a long way away, but the reality is that businesses need to ensure they are prepared for the change by April 2011, as no forced retirement notices can be issued after this date.

To add to the confusion, employers need to remember that the Retirement age is different to the Pension age (when people can draw their state pension) which will remain at 65.However, the Government has already decided that they will hold a formal consultation to increase the age at which you can draw your state pension to 66. This will not come into effect until 2016 for men and 2020 for women.

Activists such as Charity Age UK are welcoming the proposed changes as “victory against ageism” as are many employees… but why are the Government making the changes, and what does it mean for Businesses? Quite simply we are all living for longer and have an ageing population. This means that there is currently a smaller number of working people who are supporting larger numbers of retired people. Activists argue that by making the changes we could inject £Billions into the Economy as people can carry on working for longer and paying taxes whilst still claiming their state pension. This should also ease the strain on public finances as it will reduce the amount of older people claiming housing benefit etc as they will no longer have to survive on just the state pension.

From a Business point of view the proposed changes will reduce the administrative burden of the DRA - There will be no need to write to people 6 months before the DRA, hold a meeting with them and then write to them again to confirm the retirement date, but how do Business Owners plan for the future when they don’t know when existing staff will step down? Follow our simple tips below to ensure that your business is prepared for change well ahead of April 2011.

Planning for the change

• The current process triggers a conversation between Employee and Employer 6 months before the DRA and is an opportunity to discuss the future goals and objectives of both parties. Indeed, many Companies currently keep people on past the DRA because they value the skills and experience of older workers. You shouldn’t need a trigger to have this type of conversation. Ensure that you have a robust performance review process in place where you sit down with all your employees at least every 6 months and review their performance and future plans. This will mean that you can still plan ahead and can also get a good indication of whether people want to carry on working for a couple of years.. Or forever! Many employers have tolerated declining performance in the knowledge that an individual is shortly due to retire –as this is no longer a certainty, it serves to underline the importance of managing and communicating performance expectations on an ongoing basis.

• Ensure that you have a comprehensive Capability Procedure in place which all your employees are familiar with. This will help you to avoid any potential tribunals for unfair dismissal (due to ageism) by managing poor performance or long term sickness effectively and fairly in cases where over 65s ( and all other employees) are no longer capable of doing the job they were recruited to do.

• Remember that people can still choose to retire at 65 – They will just need to give the required notice to the employer and state the reason for leaving. By having regular conversations with your staff you will know their intentions early on and can plan accordingly.

• Individual Employers will still be allowed to operate a compulsory retirement process, as long as they can justify it objectively. Examples of where this may be relevant are in the Police Force or in Manual Work. In order to avoid a Tribunal Claim, it is still best practice to consider any other roles within your Company which may be suitable for such employees after the compulsory retirement age.

• In order to keep essential knowledge and skills within the business, why not look at apprentice schemes? This is where you to support a younger person’s studies with work experience in your organisation and would enable you to establish a mentoring relationship with older, experienced workers so they can pass their skills onto the apprentice who can then grow with the Company when the older person has retired.

• Finally, if you offer a package of benefits to your employees, you may need to review private medical insurance etc. These benefits will generally have an enhanced premium which the Company would have to pay for over 65s so you need to start looking at your benefits policy well in advance of April 2011.

Don't write off the skills of your senior staff

As an aside, it was also announced yesterday in the media that the world’s oldest regular user of Twitter had died at the age of 104 – ample demonstration that older people can embrace modern technology whilst keeping essential skills in the business. With the right policies, procedures and communication processes you can benefit from this legislative change whilst keeping your business safe.

We hope you have found this posting useful and informative. If you have any particular topics you would like us to cover in future postings, please email me.

PS Don’t forget to take advantage of your FREE, no-obligation HR audit, including a report detailing our findings. Simply email me or call me on 07824 707983 to arrange an on-site appointment.

P4 Performance – your HR Business Partner.


Rob Hill
Sales & Marketing Director
P4Performance Limited
www.p4performance.co.uk

Tel: +44(0)870 3807070
Mob: +44(0)7824 707983
Fax +44(0)870 1217061