MANAGING WITHOUT THE DEFAULT RETIREMENT AGE
A PANEL DISCUSSION
James Davies, Sarah McIntyre, Hannah Price & Georgina Jones
15 June 2011
The Current Retirement Landscape (1)
• The Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 came into force on 6 April 2011
• These Regulations Remove the exceptions in the Equality Act 2010 which
provide that it is not age discrimination to dismiss someone aged 65 and over if the reason is retirement
Remove “retirement” as a fair reason for dismissal in the Employment Rights Act 1996
The Current Retirement Landscape (2)
• The retirement procedure (and the duty to consider requests to stay on) have been deleted from the legislation.
• It is therefore age discrimination to dismiss someone at age 65 or over, unless this can be objectively justified
What are the options for employers?
Remove retirement age
Dismissal of those aged over 65 for one of 5 fair reasons
Maintain retirement age at 65 or higher
Will have to justify compulsory retirement age
Demographics
Default Retirement AgeLewis Silkin – June 2011
Sarah McIntyreEmployee Relations Manager
9.3 billion annual turnover
640 million annual profit
76,000 employees in 41 territories worldwide
21 million customers visit our UK stores each week
Founding member of the Employers Forum for Age
Sit on the Employer’s Forum for Age Steering Group
Have won awards and commendations for our age diversity
Younger worker focus as well – 1st high street retailer to remove the U18 pay rate
Oldest employee 83 years old
Longest service 49 years
Marks and Spencer - Overview
12
Motivation:– Feedback from stores that they were losing good people
– Feedback from individuals that they didn’t want to leave M&S
– Embrace a workforce that reflects our customer base
– Organisational fit
– Drove positive external image
Considerations and Challenges:– Strong policies and processes
– Preparation key
– Legal considerations
– Training for line managers
– Future risk?
Abolishing the DRA
Introduced following A-Day – Changes to Pension reform (06/04/06)
Organisational fit
Popular with employees
Business benefits
Since 2006 number of employees aged 65+ more than doubled from 804 – 1656
2009/10 - 85% of employees who ‘retired’ did so flexibly
Flexible Retirement
Older employees at M&S... Employee Loyalty:
– 11% 20 years plus
– 5% 25 years plus
Your Say Survey Results 2011:
– Over 65’s 82% happy with the training they receive VS Company average of 76%
– Employees with 25 years service 100% satisfied
– Over 55’s 85% positive they’d still be working for M&S in 12 months time VS Company average of 77%
– Over 65’s 96% positive they’d recommend our products VS Company average of 93%
– Over 65’s 76% positive they’d recommend M&S as a place to work VS Company average of 70%
Workplace Discussions (1)
Workplace Discussions (2)
“Whatever the age of an employee, discussing their future aims and aspirations can help you identify their training and development needs and provide an opportunity for you to discuss your future work requirements and how these impact on the employee ... They are a good way of raising the issue of retirement with older employees.”
ACAS – Working without the default retirement age
Workplace Discussions (3)
ACAS – suggested structure:
• Performance to date against targets, activites and outcomes
• Development or training needs
• Future plans (employer)
• Aims and aspirations (employee)
• Future performance
Workplace Discussions (4)
• Cannot hold employees to what is said as part of the discussion
• Flexible working opportunities in the lead up to retirement?
• Legal consequences Discrimination claimsInferences
www.sackers.com© Sacker & Partners LLP 2011
Lewis SilkinManaging without the default retirement age
15 June 2011
Georgina Jones
© Sacker & Partners LLP 2011
Managing without the DRA
PensionsIssues
Normalretirementage (NRA)
What benefits to offer post
NRA?
Flexible retirement
Retirementprocesses
© Sacker & Partners LLP 2011
DRA – Normal retirement age (NRA)
NRA?
Looks like this can
be retained
But need to offer benefits if people carry on working
© Sacker & Partners LLP 2011
Should NRA be changed?
NRA
Will not change
automatically
Increases will require
consultation (60 days)
Different for different types of workers?
Cannot change for
past service without consent
© Sacker & Partners LLP 2011
Benefits after NRA (1)
Continue DB for DB members
Continue DC for DC members
Other options? If potentially discriminatory, can you objectively justify?
Beware of agediscrimination! Starting point,future benefitssame as past
© Sacker & Partners LLP 2011
Benefits after NRA (2)
Member choice?Members could
opt out anddefer benefits
Member choice?Members whoopt out could
re-join thescheme on termsoffered to current
new members
© Sacker & Partners LLP 2011
Flexible Retirement – from what age?
Objective justification?e.g. if way of
retaining experience,or managing
transition in partsof the workforce?
Potential age discrimination issues.
Should be offeredto all at minimumpension age (55)
unless can objectivelyjustify a different age
© Sacker & Partners LLP 2011
Flexible retirement – what would you offer?
Take pension (all or part?) and continue working
Option to re-join for future? (could just be DC)
Risk benefits? (Treat as active or pensioner member? Make choices clear)
Benefits
© Sacker & Partners LLP 2011
Group insurance benefits
Very specific
Covers benefits provided by employers to employees
Only applies to insured benefits (not self insured)
Exemption
© Sacker & Partners LLP 2011
Pension schemes left out in the cold?
© Sacker & Partners LLP 2011
Pensions – new focus for workforce management?
Performance management
Sumner Redstone - 88
Working past 65
Lord Philips - 73
Warren Buffett - 80
Prince Philip - 90
Stephen Hawking - 69
Kenneth Clarke - 70
Tom Jones - 71
The Queen - 85
Helen Mirren - 65
Alex Ferguson - 69
How will employees respond?
Retire anyway?Work a bit later and then retire?Work until feel should stop?Work until chat with employer?Aim for pay off?Work beyond and wait to be sacked?
Implications for employers
Be able to planAvoid pay offs Be able to deal with underperformanceHelp employees who want to retireAdjustments for disability
What employers should do
Obtain informationConsistent, honest and prompt performance
managementConsistent approaches to training and developmentAdequate pensionsFlexible working programmesManager trainingAvoid inferences
Insured Benefits
NEW EXCEPTION
It is not age discrimination to only provide access to “insurance or a related financial service” to employees, aged under 65 (or state pension age if greater).
Insured Benefits
• Does not cover self-insured benefits
• What about those over 65 who already get these benefits?
• Will it deter employees from providing benefits to over 65s?
• If you do provide benefits to the over 65s, will you be able to justify stopping the benefits later on?
Enhanced redundancy schemes
• Will reducing redundancy payments close to retirement still be lawful? cases on windfall payments
> Kraft Foods v Hastie> Ormerod v Cummins Engine Company Limited> Loxley v BAE Systems Land Systems (Munitions &
Ordnance Ltd.)
Share schemes
• Approved & qualifying schemes – minimal impact
• Unapproved & EMI schemes
• Consider “good leaver” provisions
• Defining “retirement”:Age?Length of service?Future plans?
Thank you