British firms will face considerable uncertainty and greater risk of tribunal claims if the government fails to tackle the unintended consequences of scrapping the Default Retirement Age (DRA), a leading business group has cautioned.
According to the Confederation of British Industry (CBI), the government needs to urgently clarify its position on retirement rules and how it will respond to businesses concerns, before it scraps the DRA next year.
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. The removal of the DRA will be one of the most significant changes to employment law in 2011.
John Cridland, CBI director-general designate, said: "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.
"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. The government needs to act fast, and there should be no changes to the retirement framework until these issues are resolved."
In the absence of a replacement to the DRA, the CBI is calling for: the change to be delayed for a year, retirement conversations to be protected and the state pension age to be used as a milestone after which employers would no longer have to offer occupational benefits.
© Crimson Business Ltd. 2010