With the demise of compulsory retirement and changing social demographics, employers will be aware of the challenges and rewards of an ageing workforce.

A recent report by The Prince’s Initiative for Mature Enterprise (PRIME) suggests that a million people over 50 have been forced out of work in the past eight years by either involuntary redundancies, retirement or illness. Amid concerns that many businesses have not yet adjusted as to how to effectively manage an older workforce, we consider just what  an employer’s responsibilities are and how can they address some of the key challenges.

The law

Until 2006, there was no protection for workers discriminated against because of their age. The new law offered workers a number of protections for the very first time. It was no longer acceptable to discriminate against a worker because of their age. These rights are now enshrined in the Equality Act 2010.

However, employers were still permitted to retire workers at 65, provided they followed a statutory retirement process. This at the very least made employers think twice before enforcing retirement but did not necessarily prevent the practice of retirement as very little thought was given to why the retirement was being imposed.

The position changed on 6 April 2011 when the statutory retirement process was repealed. It’s now only permissible to retire employees in very limited circumstances where the retirement age can be objectively justified.

Consequences of getting it wrong

Not only is an employer liable for its own acts of discrimination, it can be liable for those of its employees. If an employee is subjected to age discrimination they can seek an award for injury to feelings which is designed to compensate for the discriminatory treatment to which they have been subjected. This award can be anything from £660 to £33,000.

If employment is terminated because of age, whether through dismissal or resignation, an employee can seek to recover losses associated with their loss of employment. This compensation is uncapped. It is likely that an older employer will be able to demonstrate that it will take them longer to find new employment that a younger colleague. In some cases, losses could run to several years.

Employers must also consider the reputational risks associated with findings of discrimination.

Should age be old hat?

According to the PRIME report, currently over a quarter of the UK workforce consists of people aged over 50.  This group is projected to make up over a third of the workforce by 2020. These statistics illustrate the need for employers to effectively respond to the workforce’s drastically changing demographic, but how can they do so whilst maintaining the best interests of the business?

Arguably, the default retirement age solved a lot of problems for employers. Long term ill-health problems are naturally more prevalent among older employees; in some cases there may be a perception that performance or motivation deteriorate with age. Employers can no longer rely on retirement as a means to terminate employment in these circumstances. Moreover, younger employees may also have concerns about the ageing workforce and so called “crowding out” – in that their own career progression could be hindered as a result of their older colleagues’ decision to remain in work for longer.

Employers’ internal policies should therefore achieve a balance between allowing older members of staff to continue to work if they wish to do so, as well as managing the generational gap between colleagues, whilst not being so restrictive that they prohibit the employer from fairly terminating employment if the retention of a staff member conflicts with the interests of the business. We consider possible approaches below.

Managing the older workforce

  1. Recruitment – ensure that recruitment and promotion opportunities are provided to all workers. Be aware of the age discrimination guidance on channels for recruitment and the language that may indirectly discriminate against older applicants.
  1. Training – employers are sometimes loath to invest in older workers as they believe they will see a lower return on their investment than younger colleagues. However, employees coming towards the end of their working career are less likely to move employer and may therefore prove better value. Training also ensures that older workers remain sufficiently skilled which avoids potential performance issues.
  1. Attitudes towards age – employers should look to foster a more positive attitude towards older employees, focusing on the benefits they bring to the business. Involve older workers in committees and use their experience through mentor schemes.
  1. Effective performance management – by regularly and transparently assessing the performance of all workers, employers will be able to identify any areas of concern and take steps to address them. Letting staff know that they are valued and ensuring that they feel motivated is likely to encourage them to continue to work, and to perform well. Similarly, employers will be better placed to protect themselves against any discrimination claims if they can demonstrate that they have engaged with and responded as far as possible to the individual needs of workers.
  1. Flexible working – this may assist older workers who are struggling to balance the demands of their role. Compressed working weeks and working from home, or perhaps even reviewing the worker’s key responsibilities, may give these individuals the option of remaining in work. Another consideration could be to re-engage such workers as consultants, which would again allow them more flexibility and control over the amount of work they choose to take on.

With plans to increase the state pension ages due to rise to 67 by 2028 and life expectancy increasing, these are issues that every employer must be aware of.

Wedlake Bell are a law firm providing news, articles, seminar information, areas of practice, partner, location and contact details.