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Is flexible retirement the solution to the skills gap problem?

first_imgIs flexible retirement the solution to the skills gap problem?On 27 Feb 2001 in Personnel Today Related posts:No related photos. Previous Article Next Article Comments are closed. Plansto abolish the compulsory retirement age may keep skills in the workplace, butsome feel it might be opening a can of worms. Richard Staines reportsNextmonth a working party will meet to debate the details of age discriminationlegislation which will affect all UK employers. Itfollows employment minister Margaret Hodge’s announcement to a select committeeearlier this month that the Government intends to abolish compulsory retirementat 65 and allow older employees to choose how long they want to continueworking. Bodies,including the CBI, CIPD, Employers’ Forum on Age, TUC, Socpo and Age Concern,will work with the Government to develop the age discrimination legislation,with the new rules becoming law in 2006. Thereare some key employer concerns that the working party will have to tackle.  SamMercer, campaign manager at the Employers’ Forum on Age, said, “The first issueis that the law has to be workable and flexible and employers have to be consultedon the law’s content.”Shebelieves there is a “serious lack of communication” between HR managers andpension fund managers and this has to change if flexible retirement systems areto be implemented. TheEmployers’ Forum on Age also believes the Inland Revenue will have to reviseits laws on pensions. At the moment, only fully retired people qualify forstate pensions with older people working part-time relying only on theirsalaries to support them. The forum wants a more flexible system, where olderemployees working part-time would be able to withdraw part of their pensions.Changesto the retirement age and its possible impact on pensions could makerecruitment harder in the public sector, according to Socpo adviser TimRothwell. He said, “One of the main reasons people go into local government isthat there is an excellent pension system. We shall have to take a careful lookto ensure the changes do not disrupt the existing pension system too much andcause problems for us when we try and recruit staff.”Socpoalso wants the Government to clarify at an early stage which occupations areexempt from the retirement ruling. Police officers and firefighters, forexample, are required to have good fitness levels and compulsory retirementfrom active duty could be justified on fitness grounds.Butthere are those who question the change to contractual requirements ofretirement more fundamentally. RogerBrown, senior partner of law firm Endale & Company, believes the Governmenthas missed the point. He questions whether ending a compulsory retirement agewill prevent age discrimination against those seeking work. Brownsaid, “The problem that the Government was seeking to tackle, but has missedalong the way, was the blatant discrimination against anyone over 40 securing ajob in mainstream industry and commerce. “Removinga compulsory retirement age will do nothing to stop such discrimination. Whatit will do is create chaos in all aspects of the employment process, not leaststate and occupational pension provision.” CBIdirector-general Digby Jones believes the outlawing of a contractual retirementcould lead to a US-style scenario, with many firms face rising litigation costsfrom disgruntled employees.Hesaid, “There is a need to raise the level of employment among older workers,given skills shortages and an ageing population – but doing away withcontractual retirement ages is not the solution. There may be justifiablereasons why an employer cannot extend retirement age. Indeed, it might be irresponsibleto employ people over retirement age.”Whiledetails of changing compulsory retirement and other proposals will be discussedover the coming months by the working party, legislation will definitely beenacted. This is due to the ratification of an EU directive last May, whichmakes age discrimination at work illegal.Employerswill have five years to comply with the new rules produced, but the Employers’Forum on Age is advising companies to introduce flexible retirement in advanceof the legislation.Itis proposing a “decade of retirement” model, in which an older member of staffagrees with the employer on a date when he or she will retire. The amount ofwork expected of an individual can be reduced over several years and his or herrole changed to make the transition smoother.Hodgeurged companies to adopt this approach when she announced the changes to theselect committee earlier this month. She called for employers to change theircultures to pre-empt the legislation. They need to overcome misconceptionsabout older workers having poor sickness absence records and not being able toadapt to new technology, she said. Hodgesaid, “We believe the culture change is necessary to ensure we make the bestuse of the undoubted experience and talents of all people who want to work.“Thedemographic changes mean the economy will not survive without using the talentsand experience of older workers.”Hodgeis not the only one who believes HR teams should be dealing with ageism now.TheTUC feels there is a good business case for implementing the DfEE’s existingcode of practice on age discrimination. Forinstance, firms following the code are required to evaluate the loss of skillsbefore operating early retirement schemes and consider alternatives for thosewith crucial abilities.KayCarberry, head of equal rights at the TUC, said, “With compulsory retirement,companies could be losing staff who have accumulated a lot of experience andknowledge in that workplace.”CIPDadviser Mike Emmott advised employers to adopt this “enlightened approach” tomanaging people. He said, “Employers should not be looking at people onsuperficial grounds such as age – they should be looking at what they are doingfor the company. Perhaps they could look at pension provision and moving olderpeople into part-time roles. Older people would perhaps not be so worried abouta drop in income – particularly if they had access to some of their pension.”Buta timely flexible retirement, where employees are able to draw on state andoccupational pensions while they work part-time, will not be possible withoutchanges to the Inland Revenue’s rules.Ministersagree in principle that rules should be relaxed, but the details need to bethrashed out if companies are to benefit from progressive retirement measures.GovernmentadviceTheGovernment urges companies to:–Make sure retirement programmes meet the needs of the organisation–Use succession planning effectively so that companies do not lose key skillswhen employees retire–Investigate whether different pension arrangements would ease the problem–Agree on a retirement policy with employees, communicate it effectively andapply it fairly–Support and guide people approaching retirement age–Ensure employees have choice and flexibility.Peoplecannot draw on state pensions before the age of 65, but they can draw onoccupational pensions before this. Employeesmust have retired from the employer with whom they arranged the scheme beforethey draw on occupational pensions. They can draw on personal pensions whetheror not they continue to work for the same employer.Weblinkhttp://www.dfee.gov.uk/last_img read more