Generation excess

Companies face problems created by the phased-out abolition of the mandatory retirement age, the first part of which comes into effect on April 6. Any employee that reaches 65 between April 6 and October 1 can still be made to take retirement.

However, guidance on what companies should do after October is thin on the ground and will rely on the development of law in court. No company wants to be the one that creates the precedent in law, says Nick Thorpe, partner at law firm Field Fisher Waterhouse. Companies want clear advice on what can and cannot be done before making any decisions regarding employees who are reaching retirement age, he says.

The Advisory, Conciliation and Arbitration Service (ACAS) has released a pamphlet outlining retirement guidelines for employers and employees, but it is vague in places, such as individual company retirement policies and recruitment. The lack of guidance is not ACAS's fault, says Thorpe.

A lack of decisiveness and guidance from the government has contributed to the situation, he adds, giving the example of the decision to allow employers to drop private medical care and insurance for employees over a certain age once mandatory retirement has been lifted. As yet further guidance and, importantly, the age at which benefits can be dropped have yet to be released, he explains.

Justifications​

Owen Warnock, partner at Eversheds says the law firm conducted a survey of 330 employers, employing over 650,000 people in the UK, which showed that 69% have a standard retirement age. As of October, those employers will have to show evidence to justify continuing it, he says. But the grounds on which such justification could be made have not been laid out clearly.

"A company needs to make sure any justification it uses shows that a retirement age is the best method to achieve an objective,"​ says Thorpe. "For example, the arbitrary nature of a retirement age can make it a blunt tool for dealing with issues such as declining productivity."​ Productivity from a 60- and 70-year-old may be similar due to differing rates of physical or mental decline and one standard retirement age would not take this into account, he explains.

If performance were to be used to justify mandatory retirement, any criteria used to judge it would have to apply to all employees, not just one age bracket in order to avoid claims of ageism, according to David Regan of Mundays Solicitors. Equally, any employee who is not meeting objectives would have to be given training and a chance to rectify the situation, he adds.

For example, Regan says he was talking to a company that had just introduced touch-screen technology. The firm claimed that the younger 'Nintendo generation' of employees was more adept at using it and wanted to know if they could retire their older workers on productivity grounds after October. But the firm would have violated age discrimination if it had not funded a training scheme to retrain the older employees and give them a chance to meet their production targets, says Regan.

What constitutes good productivity can also be hard to define, says Warnock. In many situations, it is difficult to accurately tell an employee what is expected of them and why they fall short, he adds.

Regan disagrees. If a company used performance targets with clearly defined goals, as well as sickness and absence records to a lesser extent, it would be able to measure performance, he says.

Health and safety provides similarly shaky ground for mandatory retirement. As with productivity, a general retirement age may be too broad and leave companies open for claims if justified on health and safety reasons, says Warnock. A forklift operator at retirement age may have to be tested more frequently but is unlikely to be more of a health and safety risk than a younger operator, says Regan. While medical problems such as diabetes or loss of eyesight can affect performance and are linked to age, they do not belong exclusively to the elderly, he adds.

Stagnation​

The most promising justification for a company retirement age is stagnation in the workforce, says Regan. If a company finds many employees are reaching lower management positions then leaving, they may have justification for mandatory retirement as a means of creating turnover in upper management and keep promising candidates in the career chain, he says.

There is a case going through appeal that contests a government claim that it would be hard to justify a company retirement age on grounds of necessary staff turnover, says Thorpe. The court case, Seldon v Clarkson Wright & Jakes, was brought by a partner against his law-firm's mandatory retirement policy. The outgoing mandatory retirement age never applied to partnerships so the case is an early test for any company's retirement policy in a non-mandatory era.

However, no decision will be made before firms must decide what to do about retiring employees. If the case was to go in favour of the partner and the company's retirement policy was overturned, it would mean any firm using similar justifications would be vulnerable to claims, says Thorpe. But if a company did not implement a policy of retirement based on these reasons before October, it would be hard for it to justify instituting it once a decision had been made, he adds.

Recruitment​

No matter what policies are in place regarding people leaving, every company will need to bring in new people. Some firms will find they have no replacement ready for employees reaching 65 before October. A mutual compromise can be reached for the purposes of training, says Regan. Getting an employee to sign a mutual agreement before October that fixes a specific date for retirement in the future and then having a second agreement for the actual retirement is the best way to keep an employee for a set time past October, he recommends.

Finding candidates to fill an open position can also be tricky. Very specific criteria will have to be given in any job description, says Warnock. That way if a younger candidate is chosen and a claim of ageism is brought, the company can demonstrate attributes that outweigh an older candidate's greater experience, he says.

In other instances, if a company specifies in a job description that a position is to be filled for the next 10 to 15 years and a candidate is past 60, they would be unlikely to see the role through. If such an instance was to go to arbitration, Regan suspects that an employer could successfully argue its position.

The absence of clear guidance means that companies are vulnerable when deciding retirement policies. As tribunal findings emerge, guidelines will be established, but until then retirement policy could be stuck in limbo, with companies unwilling to make a move and become the first to face an ageist lawsuit.