Following on from last week’s newsletter this is the second of three newsletters we will be sending you to bring you details of this impending change in law and guidelines on how your Company can manage these changes.  

MANAGING PERFORMANCE AND RETIREMENT

Stopping using retirement ages – Tips and Guidance

General principles

The removal of the default retirement age (DRA) is an opportunity for you to review your practices and processes for managing employees and their performance. Good people management is the best way to adapt to the removal of the DRA. Talking to your employees and allowing them opportunities to communicate openly and regularly is essential. Having regular conversations with all employees about your expectations of them, their performance and future plans are invaluable.
These should not be limited to younger or older employees.

Managing performance and retirement for older workers

Two thirds of businesses already operate without a fixed retirement age. Research shows that older worker productivity does not usually decline, at least up to the age of 70, where these workers have received the same level of training as younger colleagues. Older workers also tend to have fewer accidents and take less short-term sick leave.

Older workers do not tend to block opportunities for younger workers. Evidence indicates that there was no positive effect on youth employment from measures which allowed older workers to retire early. Some employers believe that removing older workers to make way for younger workers can damage productivity with the loss of existing skills and experience. This can lead to increased staff turnover and increase the cost of recruiting and training new workers.

To help your business manage without a set retirement age, you should:

• Plan ahead – use formal or informal performance discussions to talk about on-going work options, retirement options and further skills development. Ask all employees where they see themselves in a year or two to open up discussions about their options.
• Encourage employees to initiate discussions with their manager at any time to discuss options for continuing to work or retiring. A good time to do this might be after they receive a pension scheme notification about their forthcoming pension entitlement.
• Ensure all managers are trained in how to manage regular performance discussions to also give feedback, motivate and develop staff regardless of an employee’s age. Reviewing the performance of just certain age groups, younger or older, could raise concerns about unlawful age discrimination.
• Use discussions to manage under-performance, whatever the age of the employee.
  Difficulties might be remedied through training, a change of job role, workplace adaptation or a change in working pattern. If poor performance cannot be resolved, follow the normal ‘fair dismissal’ procedures that apply to employees of any age.
• Review your business retirement procedures and communicate your policies clearly to managers and staff. Older workers should be aware that they can work longer but are not expected to work indefinitely.
• Consider offering a flexible approach to retirement to help retain key skills for your business. A change in working patterns, reduction in hours or a different role may encourage your experienced older workers to stay at your company and perform more effectively. Remember, if flexible working is not open to all, then targeting it at older workers would need to be objectively justified. See the page in this guide on flexible working for older workers.
• Think about directing older workers to sources of support which can help them prepare for the financial and personal changes they may face when they retire.

Exclusions from Age Discrimination – Insured benefits

The Government has stated that it will introduce an exception to the age discrimination rules so that employers can stop offering employees insured benefits, such as life assurance and private medical cover, beyond their normal retirement ages. Businesses had been concerned that the removal of the DRA could lead to substantial costs for providing insured benefits for the over 65s.

Some frequently asked questions about working without the DRA

Q I have an employee who is not performing as well as I would wish, I was hoping to use the DRA to dismiss him when he reaches 65 but now cannot do this because the law has changed. What can I do?

A You may use one of the reasons for fair dismissal. However, a workplace discussion can help you better understand the employee’s intentions regarding their retirement. If they intend to retire then you can allow this to happen but remember an employee can change their mind. Where an employee is performing poorly and their performance cannot be improved, you have the option of dismissing them on the grounds of capability.

Q Do I have to have a retirement discussion with my employees?

A No, there is no requirement to talk to employees about their future plans but you may find it helpful to do so for your own organisational and succession planning purposes.

Q If I discuss retirement with an older worker can I leave myself open to a claim of age discrimination?

A Not if properly handled. Employers may reasonably want to know about an employee’s future aims and aspirations. The important thing is not to single out older workers. If you are going to ask older workers about their plans it is good practice to also ask other, younger workers, about their plans as well, perhaps as part of an annual appraisal meeting.

Q What can I say to an older employee at a meeting to discuss their future plans?

A It is best if you start any discussion in a general way. Perhaps asking the employee what their future plans are or how they see themselves developing in your organisation over the next year or so. Any direct questions such as “are you planning to retire in the near future” or “you seem to have been slowing down of late, have you thought about retirement” are best avoided. Once an employee has indicated that they do wish to retire there is no problem in talking to them about the date for their retirement and any adjustments they may wish to make to their working arrangements or hours in the lead up to retirement.

Q Can I protect myself by getting an employee to sign a contractual agreement that they will retire at a certain date?

A There is nothing to stop you from coming to a contractual agreement with an employee about their future retirement date but it is unlikely to have any legal force. Employees cannot sign away their employment rights except in certain circumstances where they are legally advised and sign a compromise agreement. Compromise agreements can only be made however, where an employee has a case they can bring to an employment tribunal e.g. for unfair dismissal, which is unlikely to be the case in these circumstances as the employee will still be in employment.

Q What can I do if an employee had indicated that they will retire on a certain date but then do not do so?

A If an employee has given formal notice to leave, you are under no obligation to let them withdraw their notice. However if an employee tells you during a discussion that they are planning on retiring, they may change their minds before formal notice is given. Where an employee decides not to retire and no notice has been given, the first thing to do is to discuss with the employee their reason for not retiring. This can help to establish whether
there is any issue that you, as an employer, might be able to help them overcome thus allowing them to retire on the due date or shortly thereafter. Ultimately however, if they decide that they do not wish to retire, for whatever reason, then you cannot compulsorily retire them as this will leave you open to a complaint of unfair dismissal.

Q What do I need to do in terms of changing contracts, handbooks and employment policies?

A Employment contracts will require reviewing to ensure that they are complying with the new legislation. In addition the legislation will impact on a number of employment policies for example; retirement, and health and safety and therefore you should review and update your policies and the relevant sections of your Company handbook.

Further Guidance:

ACAS have worked on a 20 page document with the Government to assist businesses with dismissals after 1 October 2011 this is available from their website www.acas.org.uk

Contact People Business if you would like to discuss our fixed price options to update your
contracts, employment policies and Company handbooks or if you have any questions about the
DRA.