As of 6th April 2011, employers are no longer allowed to give notice to employees of their retirement under a default retirement age (DRA). From 1st October 2011, the DRA will cease to exist completely, meaning that employees will have the choice of whether and when they retire. It is no exaggeration to say that this change in legislation has caused a certain amount of panic within the business community. Business representatives such as the CBI were strongly opposed to the change, and many employers have raised concerns about the impact of the removal of the DRA on aspects of people management such as succession planning, deployment, career development and performance and talent management. There has also been some suggestion that employers will be stuck with hundreds of older workers who are no longer capable of performing their jobs but are unwilling to leave the workforce.
It is time for this negativity to be discarded and the removal of the DRA to be seen as an opportunity rather than a problem. Employers need to realise that the workforce is ageing and that this will have very real and significant effects on the availability of younger talent in the future. The capability to retain older workers for longer is a way for employers to hold on to the skills and experience that their organization needs. Our research here at Cranfield has shown that organizations, such as Hertfordshire County Council and Centrica who had already removed their DRA prior to the new legislation have achieved great benefits from being able to retain workers for longer and from having an age diverse workforce. Not only do they find it easier to obtain the human capital that they need in order to successfully meet their business objectives but they now have a workforce that reflects the make-up of their customer base. These organizations have managed to facilitate the passing of knowledge down through the generations, while also benefiting from the diversity of attitudes and experience that having a workforce of different ages provides.
It’s also important to realise that not everyone will want or need to work on after the state pension age. Recent research that we have undertaken has shown that, on average, people want to retire at around 61 years of age and only a third would consider working on after the state pension age. Other research that we have conducted has suggested that of the notion of retirement is undergoing a fundamental change. People no longer see retirement as the end of their working lives but see the receipt of an occupational pension as the opportunity to do something else with their careers, to move into another, sometimes very different, career stage. Many of the managers that we interviewed said, for instance, that they would like to do more creative work , to work in the voluntary sector or to continue working in a less stressful role. In order to make the most of the removal of the DRA, we need to realise that extending working lives is not just about individuals carrying on indefinitely in the same occupational role.
Although there are, therefore, many positive aspects to the removal of the DRA it cannot be ignored that this change will lead to issues that employers will need to address. For example, employers will no longer be able to ignore poor performance in those individuals approaching retirement age but will need to ensure that they have robust and effective performance management systems in place to address such difficulties. Employers will need to understand that the career development needs of those employees who are approaching or have passed the state pension age might be different to those at earlier stages in their careers and alter their career management systems accordingly. In addition, there will be a need to review and improve talent management systems and succession planning processes in order to facilitate the development and progression of workers of all ages. The need to overcome these difficulties should also be seen as an opportunity for employers to review and revamp existing systems and practices.
Employers should also relish the prospect of identifying and tackling any ageism or age stereotypes that still flourish within their organization. We have shown through survey research of HR Managers, that as late as 2007 at least, older workers were still viewed as inflexible, lacking in technological skills and unwilling to accept change and learn new skills. We know from other research that this does not reflect reality so it’s essential that employers take steps to overcome these attitudes and therefore ensure that personnel decisions are based on skills and capability rather than on age.
Our new programme, Managing Effectively without a Retirement Age, has been designed specifically to help senior managers to recognise and take advantage of the opportunities that removing the DRA presents, while also helping them to address the challenges that are caused by this change. Through helping attendees establish the business case for retaining and developing older workers within their organization, we will help them better understand the issues involved and assist them in developing of action plans for addressing issues such as performance management, succession planning and career development so that each delegate will leave with a clear idea of what needs to be done.