Since the default retirement age was abolished in 2011 retirement is no longer a potentially fair reason to dismiss an employee.
Any dismissal because of age could lead to claims for unfair dismissal and age discrimination.
Employers must decide whether or not to have a fixed retirement age, and if they do, whether this is for all roles or specified roles within the business. Employers will need to be able to objectively justify any fixed retirement ages they impose (see below). The majority of employers do not impose a fixed retirement age.
The abolition of the default retirement age does not affect an employee’s ability to choose to retire voluntarily at any time as this amounts to a resignation, not a dismissal. See Resignation [FS10.02] for further information on resignation.
There is a very clear business benefit in understanding and planning for the retirement of key individuals and for the workforce as a whole. Many employers will be in a position of having an aging workforce or certain teams or departments which are aging and without being able to plan for the future the business will be at risk.
Since the abolition of the default retirement age, and because most employers have not set compulsory fixed retirement ages, it is important that communication is prioritised. However, it would be discriminatory to make assumptions that someone is close to retirement just because they have reached a particular age. Older employees should not be singled out for workplace discussions, it is far preferable to have regular discussions with all employees to keep the channels of communication open. The discussions should be around the future aims and aspirations, plans and career aspirations. It is legitimate to ask employees where they see themselves in the next few years, provided all employees are treated consistently.
ACAS guidance is that employers may incorporate workplace discussions into a formal appraisal procedure and that open questions about an employee’s short, medium and long-term goals can be asked.
Discussions about future plans do not need to be limited to an employee indicating when they intend to voluntarily retire, it would also be useful to discuss how they intend to retire if they indicate that this is in the foreseeable future. Flexible retirement is likely to be attractive to many employees as it will give them a way to wind down to retirement through reduced hours or a different role or focus. From the perspective of employers this may be desirable as a way to retain experienced and skilled workers for longer and allow training on the job for new starters who can learn from the individual working up to a well-planned retirement.
The discussions on flexible retirement options can take place informally or employees may want to submit flexible working requests. For further information on flexible working see Flexible Working Toolkit [T9.01].
Employers are potentially still able to implement a fixed retirement age within their business. However, the starting point is that any compulsory retirement of an employee due to their age will be direct age discrimination.
Direct age discrimination can be objectively justified (therefore lawful) if it is a proportionate means of achieving a legitimate aim. If you decide to introduce a fixed retirement age (either generally or for specific roles) then you must be able to demonstrate that (a) it was intended to meet a legitimate aim (b) having that particular retirement age meets that aim and (c) it is proportionate to use that retirement age as a means of meeting that aim.
Another potential defence to an age discrimination claim based on compulsory retirement is that the age limit on the job in question is an “occupational requirement” and that the application of that occupational requirement is a proportionate means of achieving a legitimate aim. For example, it may be an occupational requirement that airline pilots are under a certain age in the interests of air safety.
The legitimate aim relied upon must correspond to a real business need. Further, for an aim to be regarded as legitimate for the purpose of justifying less favourable treatment because of age, it must pursue social policy objectives, such as those related to employment policy, the labour market or vocational training. It must be of a public interest nature, distinguishable from purely individual reasons particular to an employer’s situation, such as cost reduction or improving competitiveness.
Legitimate aims for compulsory retirement will be difficult to demonstrate in practice. The limited case law that exists on this topic indicates that inter-generational fairness and/or dignity for older workers can be legitimate aims but these aims must actually be relevant to the particular employer's circumstances if they are to be legitimate for justification purposes.
Even if a legitimate aim can be identified it must be proportionate i.e. go no further than is necessary to achieve that aim. Less discriminatory alternatives would have to be considered (such as use of competence or fitness tests rather than purely age) and the employer would have to show that the particular retirement age that it selected is appropriate and necessary i.e. could the same legitimate aim have been achieved by using a fixed retirement age of 70 rather than the selected age of 60?
If you are considering introducing a fixed retirement age then it is highly recommended that legal advice is obtained in advance. Well thought out and detailed evidence relevant to the business will need to be collated before employers can have reasonable confidence in their ability to objectively justify a chosen fixed retirement age. Mere assertions will not be enough.
There is no fair method of dismissal based on age alone unless there is a fixed compulsory retirement age. Any dismissal based on age alone in these circumstances would likely result in claims for unfair dismissal and age discrimination.
However, employers may find that performance or ill health is an issue for older employees in the same way that it can be an issue for younger employees.
If performance is not satisfactory it should be dealt with in the normal way, regardless of the age of the employee in question. Letting poor performance go on, on the assumption that an employee is probably going to retire soon anyway, would be discriminatory towards younger employees who are treated less favourably because of their age. It would also be more difficult to eventually dismiss the poor performer (for example when it becomes clear that they have no intention of retiring voluntarily) because of the fact that their poor performance has been allowed to go on unchecked for a period of time and has arguably be condoned or deemed to be acceptable. See Performance Management Toolkit [T7.01] for full advice on handling poor performance.
Where an employee’s health has deteriorated (as can be linked to age) and they are no longer capable of performing their role this should be handled through the proper procedures and the issue of disability must also be taken into account. See Sickness Absence and Ill Health Overview [FS3.01].
As with any other dismissal, a dismissal of an employee who has reached the employer’s fixed compulsory retirement age must be for one of the potentially fair statutory reasons for dismissal and it must be procedurally fair.
Retirement is no longer a potentially fair statutory reason for dismissal. Therefore, in most cases, an employer would need to rely on “some other substantial reason” (SOSR) when dismissing at the fixed retirement age.
As with any dismissal, the Employment Tribunal will determine fairness. The ACAS Guide “Age and the Workplace” provides some useful guidance on what a fair procedure is likely to include. If there is a fixed retirement age in place all employees should know about it but when employees are approaching this age they should be specifically notified with “adequate notice” of the policy on compulsory retirement and the implications this has for them. ACAS also recommends that if circumstances permit employers should give consideration to any request by the employee to stay working beyond the fixed retirement age. However, this recommendation should be treated with caution as it could have consistency issues and could also undermine the justification for the employer’s policy on fixed compulsory retirement age itself.
For more information on SOSR see Some Other Substantial Reason and Statutory Ban Dismissals [FS56].
Employees with at least 2 years’ continuous service have the right to bring a claim for unfair dismissal in the Employment Tribunal.
An employer can successfully defend a claim for unfair dismissal if they can show that the dismissal was reasonable in all the circumstances and was for one of the five potentially fair reasons set out in statute and that a fair procedure was followed.
Compensation for unfair dismissal will include a basic award (calculated on the same basis as a statutory redundancy payment) and compensatory award based on losses attributable to the unfair dismissal by the employer, including both past and future loss. Both the basic and compensatory award are subject to statutory caps which are reviewed annually and can be found in our Statutory Rates and Limits table.
There is no minimum qualifying service requirement for discrimination claims.
Compensation for age discrimination is unlimited and will normally include a sum to represent financial losses (both past and future) and an award for injury to feelings (based on Vento guidelines and subsequent increases). See Statutory Rates and Limits table.
See Fact Sheet on Age Discrimination [FS15.02] for further information.
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