Until this year, companies were within their rights to set an age at which employees could be forced to retire. This default retirement age (DRA) was usually 64, although in some cases companies were permitted to enforce retirement at an earlier age. But from April 2011, the DRA has been phased out and by October it will be defunct.
The changes to employment law have left many smaller businesses entirely unprepared for the financial implications of continuing to employee an older workforce.
The Employment law Advisory Services conducted a survey of 1,000 small and medium-sized businesses and found that many were not ready to deal with the costs that would be incurred by private health insurance and adjustments for staff with disabilities.
Peter Mooney, head of employment law at ELAS, said: “It seems many businesses haven’t actually thought through how the new law will affect them in practice.
“Expensive death-in-service benefits and healthcare benefits are just two examples of how employing older workers will affect businesses. Risk assessments, access requirements and adjustments for disability may also need revision as workforces grow older.”
In order to deal with small businesses’ worries over high insurance costs for older workers, the Government introduced an exemption to the end of the DRA. Employers are allowed to stop providing insurance at age 65.
Another concern for small businesses following the scrapping of the DRA is that there will be an increase in employment tribunals.
If employers do not comply correctly with the new retirement laws, they could find themselves facing claims of age discrimination and unfair dismissal.
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