THE Institute of Directors (IoD) has criticised government proposals to abolish the default retirement age (DRA) of 65 saying the proposals will make it harder to create jobs.
The government is currently consulting on plans to scrap the DRA in October 2011 arguing many older people are forced into retirement.
But the IoD said yesterday a better option would be to raise the DRA progressively in line with both the rise in life expectancy and the national state pension age.
It said if the DRA were abolished, employers would be forced to sack underperforming staff rather than let them retire leading to a lengthy and expensive dismissal process. It would also mean management time was diverted away from growing businesses and jobs into fighting claims of unfair dismissal.
Small firms without a human resources (HR) department would feel under pressure to live with underperforming staff over the age of 65, it added, which would have a damaging effect on business performance and deny promotion opportunities to higher performing staff.
Moreover, bigger companies knowing they could no longer rely on the DRA to retire staff at 65 would instead concentrate on removing them by means of performance critieria earlier, meaning most people would effectively be retired at the age of 60.
Miles Templeman, director-general of the IoD said the government’s proposal to abolish the DRA showed ministers were not interested in supporting the business community.
“Removing the DRA, which gives employers flexibility in managing employees, is 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,” Templeton added.
But pensions expert Dr Ros Altman accused the IoD of “living in the dark ages.”
She said: “We all know age discrimination is a real problem in the workplace. In this day and age people are not old at 50 or 60 anymore. All the proposals mean is that if employers want to get rid of their older employees they will have to justify doing so on the basis of their performance in the same way as they would have to a 40-year old. It’s not a good enough reason to simply get rid of someone because they have reached the age of 65.”