The CBI has called on the government to tackle the unintended consequences of the removal of the Default Retirement Age in April by giving an exemption for insured benefits for employees over state retirement age.
The organisation also wants the abolition of the DRA postponed by a year until solutions are found to a range of problems it has identified with the law change.
It claims that the Government has not provided any clarity or guidance for employers on how to deal with the highly costly provision of occupational benefits for older workers – such as private health insurance, or death in service payments – in the absence of a DRA.
The CBI says forcing employers to make the difficult choice between taking a financial hit and removing benefits for the entire workforce is a barrier to extending working lives and encouraging culture change among employers.
The CBI has called on the government to introduce an exemption in the age regulations that uses the state pension age as a milestone after which employers would not be obliged to offer a range of occupational benefits that carry high age-related premiums. Once an employee is receiving state pension payments, there should be no obligation for an employer to continue to pay additional premiums. It says this would mean levelling down benefits for the wider workforce could be avoided.
The CBI believes the removal of the DRA will be one of the biggest changes to employment law in 2011 because the rules around retirement will be less clear for employers and their staff, and the resulting process potentially less dignified and more complicated.
It says that despite announcing that the DRA will be phased out from April, the Government has not yet produced any guidance or draft regulations to clarify for employers or staff what the new legislative framework will look like.
It also wants the Government to spell out how companies can use ’objective justification’ to defend a retirement age, and says the state pension age should be used as a milestone after which employers would no longer have to offer occupational benefits.
John Cridland, CBI director-general designate, says: “The ageing population and the shortfall in pension savings make it inevitable that people will want to continue working for longer. Employers understand this, and businesses value the skills, experience and loyalty that older workers bring.
“However, in certain jobs, especially physically-demanding ones, working beyond 65 is not going to be possible for everyone. The DRA has helped staff think about when it is right to retire, and has also enabled employers to plan more confidently for the future.
“With the scrapping of the DRA in April, a legislative void is opening up. We need to modernise our employment law framework to ensure that it is fit for purpose.
“In the majority of cases this will not be an issue, but in a minority it will be a serious problem for all concerned.
“The Government needs to act fast, and there should be no changes to the retirement framework until these issues are resolved.”
Ros Altmann, director-general of Saga says: “The Default Retirement Age should have been abolished years ago. The timetable must certainly not slip. Ageism has no place in a modern labour market.
Flexible retirement and gradual change in work patterns, or perhaps use of older workers for mentoring, training younger workers in firm-specific skills, job-sharing and so on will all require careful handling, but would be of enormous benefit to employers, employees and society as a whole.
Unless people keep working longer, we will all be poorer in future.”