Scrapping the ’statutory retirement age’ – clever spin, but a retrograde step

The coalition government is considering scrapping the fixed retirement age and Minister for Employment Relations, Ed Davey, is promoting the policy on the grounds of choice – You don’t have to work beyond your 65th birthday, but you can if you choose to. The stark reality of an ageing population and the clever spin of the new policy being about improving flexibility and ending arbitrary laws makes the announcement a public relations success.

Sadly though, the policy in isolation will be bad for employment and particularly for the elderly. I’m all in favour of the state extinguishing a vast number of employment statutes and regulations, but it’s a leap in the wrong direction to effectively extend employees’ rights whilst continuing to undermine the discretion exercised by the employer.

As far as practicable – and certainly a lot further than permitted in 2010 Britain – we should allow workers and businesses to negotiate their own contracts. So remove statutory provisions about retirement ages by all means, but replace them with the discretion to write into an employment contract that any retirement date can be agreed. This might be 65. Or it might be 35. It could be a ten or twenty year deal from the employee’s start date. Or, rather like some football managers, some employees might have a rolling contract renewed on a year-to-year basis. If the coalition’s proposals are going to remove the dead hand of Whitehall regulation and replace it with this sort of discretion, then that would be a welcome move.

Unfortunately, this doesn’t seem to be the case. From an employer’s perspective, offering a contract of employment could be seen as close to offering a deal for life. Assertions that people can be “performance managed” out of jobs towards the end of their careers are of little comfort. Workforce planning becomes very difficult and costs to the employer are certain to rise. Neither of these is conducive to boosting employment.

Indeed, recruitment decisions may start to go against the interests of those in their 50s and 60s. A young person at the start of their professional career, taking a role as a stepping stone on their long career journey, might stay in post for a few years before moving on elsewhere to a more senior position. But someone in their late 50s, possibly taking on their last employed role, is far less likely to depart willingly. And the employer’s commitment is open ended – how do they know whether the employee is planning on retiring at 60, 65, 70 or 75? Or maybe later still. If the employer has concerns that due to the onset of age or declining health, they might find themselves with a long-term staff appointment with diminishing productivity, they are likely to lean towards younger recruits.

A flexible and dynamic labour market will tend to thrive as statutes and regulations are repealed, but only if combined with much greater discretion in terms of freedom of contract. Getting only half this equation right could prove to be a retrograde step.

7 thoughts on “Scrapping the ’statutory retirement age’ – clever spin, but a retrograde step”

  1. Posted 29/07/2010 at 14:16 | Permalink

    Fixed term contracts already exist.

  2. Posted 29/07/2010 at 15:39 | Permalink

    Quite right. Surely those who signed on under the present regime should be deemed to have agreed to retire at 65. If any mature employees (I refuse to call them ‘elderly’!) wish to negotiate new terms with their employers, good luck to them.

    As things are, it is often extremely difficult and troublesome for employers to get rid of employees. So, quite naturally, many are reluctant to take on new employees, especially if there are reasons for regarding them as ‘risky’ (e.g. if they have just got out of jail, or have sub-standard qualifications). But those are the ones who most need help.

    Genuine flexibility means less government interference, not a different kind of interference.

  3. Posted 29/07/2010 at 16:07 | Permalink

    I don’t buy the throwaway line that those who are underperforming due to age can be politely shown the door, either. As Len Shackleton pointed out here on Friday, the odds are stacked high against employers already without an ETS which is often predisposed to judge on an arbitrary and procedural basis rather than looking at the case as a whole.

    Even if an employee is so old they can barely move, just one small error in the dismissal process and it’s an automatic unfair dismissal finding. Many small businesses are so wary of these penalties, they will no doubt keep on staff who are just not productive.

    Employment laws need rebalancing before sweeping away age-related rules IMO.

  4. Posted 29/07/2010 at 16:45 | Permalink

    Presumably the principle is that an employment contract, like other voluntary contracts, should normally benefit both parties. If one of the parties comes to believe that such is no longer the case (whether with ‘justification’ or not) then it should be possible to terminate the contract — with appropriate notice. The employee can easily do this already: it is the employer who is often seriously hampered.

    The idea seems to have got about that employment is some sort of ‘property right’, and that losing one’s job necessarily deserves ‘compensation’ from the former employer. This seriously damages the flexibility and competitiveness of the labour market.

  5. Posted 29/07/2010 at 20:41 | Permalink

    @Will, as Professor Myddelton says, if fixed term contracts exist, will it be acceptable for me to only offer employment to future IEA employees until the date of their 65th birthday? Are the government going to ensure that employers have this ability?

  6. Posted 30/07/2010 at 08:22 | Permalink

    Will, it is very difficult to enforce a fixed-term contract after 12 months (employment rights are acquired). More generally, I agree with you Mark. And The Times article (page 3) on this yesterday was completely misconceived from beginning to end (by three authors). It argued that this led to labour market flexibility and stopped employers from being forced to through workers on the scrap heap and so on. Maybe they just read the government press release.

  7. Posted 22/08/2010 at 15:54 | Permalink

    So much of this debate about Statutory Retirement Age seem based upon the misguided assumption that each and every one of us ages at the same rate – biologically speaking. What a nonsense! Some of us die in the womb. Some of us die after a lifetime of over a hundred years. Most others of us mortal humans die at an indeterminate age due to all sorts of external factors – war, disease, stupidity, or simple accident of birth.

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