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Employers see hope in retiring staff after all?

Whilst the political anoraks were gushing over the James and Rupert Murdoch testimony to the Leveson Inquiry this week and questioning whether there would be a new Culture Secretary, a number of employers were chewing over the impact of a UK Supreme Court ruling that suggested that employers can force retirement.

Previously it was very common practice for employers to have what became a ‘default’ retirement age that was often 65 at which point workers even if they wanted to work on would be compulsory retired. However that right was fully abolished on 1 October last year and it meant that if employers wished to retire staff it would have to be objectively justified and could not be done on age alone.

Now this was excellent news for those people who felt that they wanted to work on but were previously forced to retire especially with the increased longevity that we now have. For example, the average 65 year old in 2012 can expect to live to the age of 83 and the pensions crisis means that in a lot of cases people just can’t afford to retire and need to continue working.

But for employers the change in the retirement rules meant that they would be restricted on changing their workforce- quite often younger staff would be brought in when someone retired, or at least it was an opportunity for a company or organisation to cut a post without incurring redundancy costs. Politically it is also becoming a problem. Youth unemployment has topped the 1m mark with just over 22% of people under the age of 25 out of work and the opportunities for younger people to apply for jobs has receded as jobs that would traditionally have been opened up for them do not exist as people have been working on.

Age discrimination is a big issue for employers and the Supreme Court judgement this week is a landmark ruling because it gives employers some much needed clarity on the kind of grounds on which workers could legitimately be retired. In their judgement, the court indicated that issues of succession and poor performance could allow people to be retired and that in particular “All businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified in their particular business”.

So there is some clarity now but the belief from employment lawyers in light of this important judgement is that employers now need to be proportionate in their workforce planning to justify forced retirement rather than simply setting a specific age at which people had to retire. The bottom line is that such rules have to be objectively justified which could include the need to ‘refresh’ their organisation.

My sense though is that whilst this judgement and the clarity it brings is to be welcomed, employers need something more specific to help them plan for the future and  to avoid claims of ageism.