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January 13, 2011 8:08 pm
Business leaders have accused the government of undermining its own aim of boosting enterprise and creating jobs, as controversy erupted over the coalition’s decision to press ahead with scrapping compulsory retirement at 65.
Ed Davey, employment relations minister, said on Thursday that abolition of the default retirement age – to be phased out from April and scrapped by October – was “great news for older people, great news for business and great news for the economy”.
The coalition swept aside business pleas for a year’s delay to avoid legal confusion and tribunals. Mr Davey dismissed fears that allowing older workers to stay would make it harder for the young to find jobs, saying the change would boost the economy and enlarge the labour market.
Age campaigners, who have long pressed for the default age to be scrapped, said employers had had plenty of time to prepare and urged them to focus on how to use the skills and experience of older workers.
Scrapping forced retirement for most employees, except a few occupations such as police officers and air traffic controllers, is expected to boost the 850,000 who work above 65. Those working beyond the state pension age are already the fastest growing section of the workforce. Thursday’s announcement coincided with publication of the pensions bill, raising the state pension age to 66 by 2020.
But John Cridland, director-general designate of the CBI employers’ group, said: “The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance. Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.”
The government published guidance by Acas, the conciliation service, to reassure employers they would still be able to conduct performance appraisals and fairly dismiss staff no longer capable of doing their jobs effectively.
It also exempted group risk-insured benefits such as life assurance and medical cover, so that these – expensive to provide for older workers – can be withdrawn at 65.
According the government’s research, more than two-thirds of employers, including B&Q, Nationwide, JD Wetherspoon, BT and Marks and Spencer, already operate without fixed retirement ages. Mr Davey said getting rid of them had boosted their business.
But Miles Templeman, director-general of the Institute of Directors, said abolition of the default age, which gave employers flexibility in managing employees, was “incompatible with the government’s stated desire to boost enterprise and create new jobs. In this era of high unemployment the government should be making it easier for businesses to employ people, not harder.”
David Frost, director-general of the British Chambers of Commerce, said: “The government has pledged to reduce the burden of employment law, yet scrapping the default retirement age will simply add to the raft of new legislation that is going to hit businesses in April.”
Business is concerned at new rights for fathers to claim extra paternity leave and a widening of the right to request flexible working.
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