Fixed retirement age axed

The default retirement age will be scrapped from October 2011, under proposals announced today by the government.

At present, employers can dismiss staff when they reach the age of 65, however this will change next year, due to people living longer, healthier lives. The measure comes as the government is encouraging people to work for longer against the backdrop of demographic change.

Employment relations minister, Edward Davey, said: “With more and more people wanting to extend their working lives we should not stop them just because they have reached a particular age. We want to give individuals greater choice and are moving swiftly to end discrimination of this kind.”

The consultation paper also announces plans to review when the state pension age should increase to 66, and to re-establish the link between earnings and the basic state pension.

The proposals are welcome news to small firms who have no intention of enforcing a blanket policy to dismiss their staff at 65. However, there are concerns that the new plans will limit businesses’ ability to handle their employees.

Dr Adam Marshall, director of policy at the British Chambers of Commerce (BCC), said: “The government has pledged to reduce the burden of employment law, but at the same time it is proposing to restrict businesses’ ability to manage their workforce by phasing out the DRA.

“Many small and medium-sized firms value the DRA as it triggers a conversation about an employee’s future and provides both sides with an opportunity”.

He continued: “Employers agree that the DRA is currently too low and needs to rise for both economic and demographic reasons. However, if ministers want to make a positive change, they should either raise the DRA in line with the state pension age, or offer employers a new dismissal route that helps businesses manage their workforce more effectively, regardless of age.”

© Crimson Business Ltd. 2010