Jeanette Makings, Director of Financial Education Services – Close Brothers
Debbie Holmes, Senior HR Manager – Clifford Chance
Jane Burke, Group HR Director – WA Shearings Holidays
Sue Cooper, HR Director UK – Atkins plc
Mark Goodlake, Senior Director of Reward – Astellas
Ed Griffin, Group HR Director – CSM Sport & Entertainment
Charmyn Hall, HR Director – (Home Affairs), Serco UK and Europe
Makbool Javaid, Partner – Simons Muirhead & Burton
Neil MacIntosh, HR Director – CABI
This year the abolition of the Default Retirement Age attracted headlines relating to the key facts that no longer will employees automatically retire at 65 and that employers will have to either decide on a justified retirement age or operate without a retirement age altogether.
As the significant detail percolates through, employers are considering the far-reaching implications and coming to terms with the impacts on the business, as well as addressing the key issues. As a result, employers will be contemplating their entire approach to employee retirement and preparing for the consequences of an older workforce, and there are many areas in HR that will need to be
reviewed or modified. From contracts and policies, to health and wellbeing, absence management, succession and on-going engagement, businesses are looking at flexible working practices for older employees and more training for line managers on issues such as performance, sickness and absence management. There are also important legal issues to be considered, as changes expose employers to potential discrimination law suits.
In view of the abolition of the DRA what are the key implications for employers and employees and the challenges to meet the legal framework? Do your organisations have a retirement age or have you abolished that?
Mark Goodlake: We’re reviewing it at the moment, but because of the profile of our workforce, this has not yet been an issue. It will become an issue, as our workforce ages, so we will have to deal with it. We’re looking at the implications from a number of angles, particularly if a number of people suddenly ask to be employed past 65, what would the financial impact of that be, but also how can we use this to our advantage?
Of course there are implications, you wouldn’t want a coach driver, 89 years old, who may have agerelated disabilities, driving 60 children through the Alps.
Jane Burke: There are health & safety implications, we’ve taken away our DRA. We have a lot of older employers and there are huge benefits employing a wide variety of ages. The only fixed retirement age we do have and I would say we’ve changed our contracts accordingly, is with our drivers, where the retirement age is 70, as there are health & safety risks relating to driving as you get older. We also carry out additional checks in terms of healthcare and thorough driving and mobility assessments for drivers.
Jeanette Makings: From our experience with a number of public sector bodies, in particular Police Forces and Fire Services there are examples of the defined exemptions, because if part of your job requirement is activity and you become less mobile or less able to fulfil that then that’s a justification.
Sue Cooper: We don’t have a retirement age anymore and, because we are selling professional expertise, if we can sell that expertise and people are staying on, that can be a big advantage of knowledge and experience.
Charmyn Hall: We have very few roles where we could, or would even want to, justify objectively imposing a retirement age. We have not really communicated this law change and so we do need to help our employees understand what it means for them, and why it is a positive step forward. It is also a chance to get their feedback on what they think are the issues and opportunities and how we can support older workers.
Ed Griffin: Having grown the business rapidly through acquisition we have quite a lot of integration work to manage. On existing contracts we have some work, but it’s less of an issue with new contracts. We have people doing rigging work and fitting signage, so physical health is a fairly critical issue. Ironically we also have issues, I think, around our consultancy work, where a little bit more grey hair in that part of the workforce is not a bad thing.
Debbie Holmes: We removed any reference to retirement age, had a long look at the impact on life assurance and other benefits and the one thing that caught us slightly was people reaching 65 and suddenly being no longer covered by permanent health insurance. They are not obliged to retire, so we dealing with this.
Can I ask around the table, do you have a reasonable understanding of what the legislation is requiring from employers?
Mark Goodlake: I think the case law is quite confusing, if you compare the UK with some other countries, then it’s much more ambiguous, in terms of retirement age. If you go to France or Italy, for example, it’s 70, or similar, so it is not so clear, in the UK.
Makbool Javaid: Not surprisingly it will take time for clear guidance to emerge. The European Court of Justice has taken a view, which gives businesses a lot of room to manoeuvre to set retirement ages. No doubt influenced by social policy considerations caused by the demographic time bomb and the European economic strategy.
There are practical implications too, workforce planning and future planning, aligning resources with the future needs of the business.
Sue Cooper: With workplace planning at Atkins we removed reference to DOB/age some years ago on all the records we distribute to managers, which is as it should be.
Jeanette Makings: I know we’re only a year on, but has anybody seen a change in the percentage of people retiring? I know the ONS has recently published data showing a large decrease.
Charmyn Hall: One of our challenges in planning is that a third of our workforce in 2020 will be 50 and over, so we need to balance taking action in the future, with competing investments that we need to make for our staff in this financial year, around engagement. Our succession plans are aligned with what we need to do this year, up to a typical period of five years. This time bomb isn’t felt yet and it’s challenging because it is not an immediate pressure.
Jeanette Makings: Just from our experience of working with large organisations and a number of professional service firms who have regular and large recruitment exercise from graduate upward, they didn’t envisage this legislation change in their recruitment plans of 15 years ago and so their current staff levels could not have planned for any decrease in senior/late career leaver numbers. So this legislation is not only impacting people in their late career, it’s impacting stages all the way through the workforce.
Debbie Holmes: It is not a major issue for Law firms as many in the legal profession will have made a career decision to leave the organisation if they do not become a partner.
Neil MacIntosh: We’ve been happy for people to work beyond their retirement age because it’s been mutually beneficial, but our concern would be about what we do when it’s not seen as being mutually beneficial. This is not yet an issue, but it might become one in time.
Jeanette Makings: It’s a sensitive topic and you need the data to back it up, people need to see they are living longer; therefore they’re going to have to fund that longer life. This either means they have to be richer when they retire or they have to work for a bit longer. Many people have known this issue existed but it’s a bit like managing your budget, you kind of know roughly where things are but not many people sit down every week and get the calculator out and work it out exactly.
But would you say employers are by and large fairly sanguine about this? There are many positives amongst the challenges.
Jan Burke: In the past, managers could use the fact that an individual was 65 as an excuse to get rid of them. It will take time, but that culture is changing and the law will encourage employers to treat everyone the same way regardless of their age.
Debbie Holmes: I was just going to observe that I suspect in 30 years’ time, we’ll look upon age discrimination in the same way that we now look back on sex discrimination or race discrimination, we can’t quite believe it was ever allowed.
Mark Goodlake: It’s probably a good opportunity to rethink the way you do succession. We do tend to think about younger people, their career paths, rather than people at the latter end of their career.
Ed Griffin: We’re fortunate that in parts of our business the strategic timelines are really quite long term as everybody looks ahead to who’s going to win the bid for the Olympics or World Cup in 12 years. So we actually get a longer term view and there’s a commercial imperative to thinking ahead and I think that varies for most organisations as to who takes that timeline and how long it is.
From a legal point of view what key issues are manifesting? Discrimination is likely to be one.
Jeanette Makings: I know employers who are watching case law to see what’s happening and how that unfolds, before making any significant strategic changes. I think all companies are interested, particularly HR professionals as they want to do the right thing for their people. Most companies, and certainly HR, want to treat their employees well, they want to treat them consistently, they want to treat them in line with their culture and in line with the work staff do. They want to reward staff appropriately and so that’s the premise that most people come from. I also think there’s another trend that’s building more recently, where people are tending to stay with companies for a bit longer, rather than changing jobs every two years. That’s also part of the employer recognising engagement and recognising the investment they’ve already put into that individual.
What are the typical cases that are presenting as a result of the abolition of DRA?
Makbool Javaid: In the legal sector, the Seldon case is about the retirement age in the partnership deed of a law firm. Law firms and professional services outfits are notorious in having certain cultural views on the ability to generate business and work. The general view is that you will start tapering off at a certain age. In Seldon the court said that the need to avoid expelling partners by way of performance management relates directly to the social policy aim of protecting dignity and was justifiable. There is a cultural shift that needs to take place. There is pressure on the labour market because the state is not able to fund workers retirement. Employers haven’t necessarily made that cultural shift as yet so there’s a mis-match between the two.
It’s in the culture, things will have to change.
Sue Cooper: I think we’re going to have a situation where you’re going to get those relationships breaking down and people going out with less dignity when they retire, because they haven’t quite known when they are not working effectively and companies don’t want to manage out loyal long serving employees, but there may be no alternative.
How should employers change the way they manage end of career and exits?
Sue Cooper: We want to treat people fairly, we will need to adapt and manage more actively, the later years of a person’s career.
Makbool Javaid: There was an exemption in the Equality Act before the DRA was abolished that if job applicants who were six months off 65, the normal retirement age, could legitimately be refused employment. Now that’s gone, there is a risk of age discrimination claims.
Neil Macintosh: The current generation aged 55 plus have often been in final salary pension schemes, and many have been mentally working towards and looking forward to retiring at 65. With more current staff working longer out of choice or necessity, how does the next generation get into the workforce?
Mark Goodlake: I think there’s going to be a lot of emphasis on line managers, managing this longterm.
Jeanette Makings: We haven’t got into cost yet but part of the reason I’m concerned, the average staff cost will rise. It may not be noticeable yet but it will become more so in coming years – experienced people tend to have higher average reward packages, it’s also more expensive for employers to insure older workers.
Debbie Holmes: Organisations might be making decisions that are no longer able to provide medical insurance to anybody if required to provide it across the organisation, so I suppose unless that legislation changes there is a possibility that it might become discriminatory not to provide that benefit.
Jeanette Makings: We are in the transition period and this is the most difficult because there isn’t a blueprint for how to act, there isn’t a blueprint for contracts, insurance, costs or succession planning, so there will be some planning and adjustment needed.
So employers will make those mistakes and the cases will come to court before we decide what the grey areas are.
Jeanette Makings: I think it’s a very British way of strategising – to wait and learn from case law or the practises of others. But if we take what you’ve said on health insurance for example to its ultimate conclusion, then that will mean health insurance will go off the benefit agenda altogether and how many years will it take to do that? That’s maybe something for employers to start thinking about now.
Neil Macintosh: The legislation may allow benefits to cease at a certain age, but what do you say to a person in medical treatment under a company policy, for example, when they become 65 or 67 but still carry on working?
Makbool Javaid: The law does allow you to make that decision. However it does lead to a two tier workforce, the post 65 workers with no benefits and everyone else.
This is clearly discriminatory.
Makbool Javaid: Because the cost is so much higher, employers have to be given the room to make that particular decision.
Jane Burke: With life insurance, it depends what your contract says and what your insurance company allows. I’ve extended all ours to 70, it is clearly stated in our contracts and PHI continues to stop at 65 where it is applicable in our contracts.
Ed Griffin: There’s actually a massive hidden cost which is about managing the complexity of this and I think there are so many different things that need to be considered. My guess is that with aging workforces we’ll see more people requesting flexible working arrangements, but the issue then is of the management skill to manage that complexity in an objective way.
Charmyn Hall: Research demonstrates that short-term absence is lower in the older age groups, so we need to help our line managers and all staff to challenge any wrong assumptions in our workforce.
Ed Griffin: I think we’d have issues around things like time off in lieu so where we have people working on major events, there’s an extraordinary intensity of work over a certain period of time, and I have no evidence on this, but I wonder if the recovery time almost from having worked on one of those major projects will be significantly longer for older people.
Do we need to include such issues in the training of line managers, as avoiding assumptions about older employees?
Charmyn Hall: There will need to be training on how we make sure we don’t inadvertently make assumptions during recruitment based on someone’s age, such as they won’t want promotion, as they’re winding down. We are replacing assumptions about the older workforce with facts about the characteristics of this age group. Training in itself won’t change behaviour, this is at the core of line management training and that is developing the soft skills to engage with your staff and treat them as an individual. This could be the great thing about this legislation, as it is another opportunity for us to emphasise why we need to develop the skills that you need as a line manager.
Sue Cooper: Thirty years ago people would not think twice of saying to a woman, how many children are you going to have? They would even ask that at interview. It is a diversity issue and it will take time for some managers to get to grips with the fact that it is not acceptable to ask those questions any more.
Jeanette Makings: Managers will need some additional training in personal development discussions. There must come a stage where people are not in a career building phase, but in a career maintenance/run off phase. Line managers must help people move forward and develop.
Charmyn Hall: The PDR discussions need to give our line managers more guidance on the kind of questions to ask and how to ask them. The skills to create that environment that people can talk to their line manager.
How do we handle the realities of ageing such as dementia and Alzheimer’s. Where does the employer’s responsibility lie?
Ed Griffin: I think one area is training managers to be able to identify and appropriately talk about things like Alzheimer’s. But where does the employer’s responsibility lie?
Charmyn Hall: I would be concerned if people started associating older workers with increased risk around dementia. Most of our policies would probably help our managers to take the right action. I think it’s back to the education and training.
Ed Griffin: The issue is very often the individual may have forgotten what happened and there’s this sort of horrible irony in dealing with it that you may not have with other conditions.
Charmyn Hall: We might need more specialist training around different kinds of mental health awareness issues but this would be a good thing for all of our staffing population.
Jeanette Makings: You may be in a situation where, for example, everyone recognises changes and symptoms with an individual except that individual themself. So confronting the problem in a workplace environment may be difficult and could very well lead to discriminatory charges.
Makbool Javaid: Employers are obliged to provide you with a safe working environment. If someone is suffering from Alzheimer’s or some other disease which has a degenerative effect, the disability strand of the Equality Act comes in and the employer has an obligation to ensure that they make reasonable adjustments to the workplace. It doesn’t necessarily mean that that individual has to leave, you have to look at the workplace and you are obliged to make reasonable adjustments.
Jeanette Makings: And it’s not just relevant for the individual concerned, it’s also the impact on the rest of your workforce. They will see how you are treating their colleagues and translate that to how they expect you may treat them.
Neil Macintosh: This may also be similar to how you might deal with alcohol and drug abuse, where people may or may not be aware of the impact of their condition, but you have a duty of care to them and to others, so you might apply the same level of sensitivity.
Jane Burke: You have to keep the performance of the individual central to any issue and the key is to train your managers to identify when performance dips and try to help the individual, either regain their level or provide an alternative solution.
Makbool Javaid: The difficulty with certain age-related symptoms and disabilities is that there isn’t a particular test that you can use and if you get it wrong then the consequences are quite serious.
Sue Cooper: I think there’s just an issue as people get older with things like forgetfulness, they’re not ever going to have actual dementia, but in some industries forgetfulness can have serious consequences for the business. There are going to be more grey areas.
Makbool Javaid: Dementia or Alzheimer’s qualifies as a disability and the obligation on employers will kick in. Where one gets into difficulties in the area of disability is a reluctance to make adjustments and to be innovative.
Neil Macintosh: But that would be no different if somebody in their 20s had MS.
Makbool Javaid: But is there a temptation with someone who is older not to exert as much effort in finding an alternative? There’s a greater temptation to try and side-line older workers whereas with the MS sufferers, early on in their career, one may be more likely to look for an alternative role, for example.
Charmyn Hall: Statistics that DWE published, from the Health & Safety Laboratory, up until the age of 70, provided you give the younger person and the older person the same training, showed there’s no diminishing performance.
Neil Macintosh: We actually all hope to get older, but without the discrimination. It will be important, therefore, to encourage the flexibility that this might bring into the workforce, where people have different career plans over time, that it isn’t always onwards and upwards, it might be onwards and across, or even onwards and downwards, and with a mixed pattern of working hours.
Inevitably, these changes will test law in the courts.
Jeanette Makings: You have to consider discrimination across the workforce, make sure that people are treated in a balanced and fair way, to take just one example, opportunity and career potential.
Makbool Javaid: The European Court of Justice has taken the view that the aim is to avoid disputes with older workers concerning their competence. So we need to make use of the experience and skills that older workers have, but we will need to be innovative to find another way of allowing them to work in a more flexible way. I think it is good for diversity and turns around the idea that your career has a certain trajectory.
Neil Macintosh: It is worth noting that when pensions were introduced across Europe in the 19C and 20C. With people living longer, our definition of a long and happy retirement is going to have to change.
Debbie Holmes: That’s the current expectation of our society isn’t it, people do expect to retire at that age and then have 30 healthy years ahead of them.
Mark Goodlake: Company pension schemes come in at 65, but the reality is people won’t be able to afford to retire.
Ed Griffin: Will we actually see a point where Government is putting even greater pressure on us as organisations to play that part in how older people are sustained?
Sue Cooper: There’s a psychological problem with some people having a drop in earnings because they are doing a lesser jobs. When actually, you could draw your pension and do a lesser job, which they may enjoy more and which is less stressful, that would be a good position for people to adjust to.
Debbie Holmes: Unless they’re getting something in exchange – people are often prepared to accept a reduction, more free time for example.
Sue Cooper: Well I’m still not sure they’d be keen to accept a lower hourly rate.
Jeanette Makings: I think the only circumstances where you can justify that, is if there is a role change. I think if they feel they’recontributing at the same level, I think they have every right to want the same pay.
Jane Burke: There’s evidence in some companies that people are re-training, as people get older and moving into part-time or less stressful roles.
Makbool Javaid: Those are excellent points, but will only work if we develop a culture where talking about one’s career is embedded into the appraisal so that it’s not completely out-of-the-blue when you reach a particular age. Career planning throughout.
Neil Macintosh: I think that experience will change attitudes, as more colleagues change or downsize their roles and that have been supported by their employer.
What impact are the changes having on staff motivation, engagement and resource management?
Mark Goodlake: In senior key positions, people do tend to stay in those jobs longer. We’ll have to be more creative about using people towards the end of their career in different roles, it can block those key positions.
Debbie Holmes: In our engagement survey, consistent data on the older population shows age 50-plus employees are more engaged than other age groups defined in our survey. So I think there’s certainly no evidence to suggest that engagement deteriorates.
Jeanette Makings: I wouldn’t expect older workers to be less engaged, but I would be interested to know the engagement impact on the people immediately beneath them.
Charmyn Hall: People might stay in their jobs longer, but if they’re doing the right job and are performing then actually does that matter? We can still move people around, give them more experiences, whatever age they are.
Jeanette Makings: Just as new joiners attend an induction course, once people approach state pension age, a course providing late career and retirement planning would be effective. Entirely voluntary, providing the guidance that staff can access their pension at 55 should they wish, so they know their choices i.e. should they defer it, when should they retire, when can they afford to retire, what’s different in retirement. We see 10,000 people every year on retirement courses and the most common piece of feedback we get is “I wish I had been on this course years ago”.
Neil Macintosh: It would be good to get people thinking about the future and their retirement plans right from induction, helpful in terms of asking everyone to think about their longer term working plans.
Jeanette Makings: Most people we see talk about retirement in terms of affordability and that’s certainly how it’s reported in the press. That’s one of the reasons for removing the default retirement age, because people have to take a bigger stake in funding their own retirement. Not many people can categorically determine exactly when they can afford to retire if they don’t have all the information available to them and that’s something we come across a lot. People who sit on our courses are astonished about how much they don’t know and that makes quite a difference to the way they think about and plan for their retirement.
Sue Cooper: We ran some retirement courses for a few years before the age discrimination came in and we got a mixed reaction. We used to send people a book when they were 50 and there were more people that rung up and said “you’ve upset me so much by sending me this book”, than there were people that said thank you for the book.
But with age not in the equation, people won’t be so sensitive.
Jeanette Makings: I think if as an employer you can adopt that approach then the cradle to grave education programme is fantastic and is the blue ribbon. It not only means your staff are in the best position when they get to that stage, but in the meantime they understand their benefits well, they value their benefits, they make better decisions as a result and should therefore have either lower financial stress or improved financial wellbeing whichever way you want to look at it. There aren’t many companies that can put that type of resource behind a full programme.
Jane Burke: Retirement counselling currently tends to be provided by big companies who can afford to put people on it and a lot of companies can’t, so there is an affordability issue Jeanette Makings: The justification is you can’t elect to take your pension until a certain age, so if you’re 35, other than ill health, you can’t take your pension until 55 or whatever your scheme age. Companies that want to support staff approaching their pension age recognise they need help in understanding their choices and making better informed decisions. You can’t offer that to someone aged 20, because they’re not in that situation. That isn’t discriminatory or ageist it’s just practical and a recognition of differences relevant at different stages of a career.
Sue Cooper: I think the expression “late career management” is quite good. I’d much prefer it to talking about older workers. I think it’s having the confidence to think about the positives and not worrying about exclusion. There’s women’s programmes, graduate programmes, so why not late career programmes.
So what is the ethical way of identifying people that may want to retire, and managing towards best outcomes within the law?
Makbool Javaid: You can never justify sex or race discrimination for example, but with retirement decisions you can. We shouldn’t necessarily feel we’re walking on egg shells.
Jeanette Makings: For some, the decision to leave isn’t about affordability it’s about fear of lifestyle change, a change in status, and you can help make that transition smooth, showing them what the other side of that fence looks like, including transitional planning, but also impact on relationships, as well as pursing other roles, employment. We find that the retirement courses are an active and positive strategy.
Sue Cooper: At the moment redundancy payments go down to almost nothing by the time you get to 65.
Jane Burke: Yes, potentially you’re ignoring the years they work beyond, as it is capped at 20 years, so in theory it should be extended with the extra years people work but currently it’s not.
Makbool Javaid: An employer can have a contractual arrangement which is more generous than the statutory entitlement and the formula used, the statutory 20 years and the age bands. Most employers would probably shy away from it because of the potential costs.
Jane Burke: It will naturally evolve that performance will have to be managed or coped with because compromise agreements will never be a mass solution, due to the cost.
Jeanette Makings: When the legislation was announced, the IOD came out and made a statement that this was going to significantly impact smaller and medium sized businesses, because it would mean that they would have to go through costly and time-consuming performance measure processes, and potentially an increase in tribunal procedures, to get rid of staff who would have naturally left at retirement age. That isn’t there anymore so a business will have to go through performance measures which, for some businesses that don’t have embedded HR facilities perhaps, is a long, hard, difficult process.
Ed Griffin: We should think about knowledge management and knowledge exchange. So that at any point when somebody has been in a role just for 12 months they’re thinking of who else could pick this up if you went on to do something else. There should be an ongoing conversation that’s had and there’s something about the management disciplines that are needed that actually help address some of the age related issues.
Jeanette Makings: This is also about ambassadorship and continuing your brand loyalty beyond full-time employment. In our experience, irrespective almost of how you’ve treated people for 30 years, how you treat them at the point at which they leave you is the lasting legacy for that individual and has the potential to cement or completely destroy all the goodwill that had been built up over those years.
Neil Macintosh: I think that models and patterns of employment will shift more generally to accommodate changes necessary to balance pension shortfalls and increased longevity. Portfolio careers will become more of the norm as part of a much more flexible view of careers and how they develop over time, perhaps something to think about at school as part of the curriculum.
Charmyn Hall: We are starting to mix training, thinking about the composition of the training groups, experienced workers alongside newer workers.
Debbie Holmes: We need the role models, that successfully go through to the late career stage.
Jeanette Makings: We are talking through problems and discussing solutions because this is a new frontier. It is happening now and so we’re the ones that are going to have to hammer it into shape over the next couple of years, it’s going to happen.
Debbie Holmes: The biggest barrier is we work in silos, but we all know what opportunities are available in our organisations, and that is the biggest challenge.
Neil Macintosh: We can do this, but it is a challenge for all of us in terms of different models of working, and it’s probably our challenge as HR professionals to develop a much more flexible approach to employment to support this change.
Mark Goodlake: We have to put it in perspective – we could assume that everyone is going to want to work past retirement age, which isn’t quite the case. so I think I’d rather take the positives out of it in that sense than think of it as a great threat.
Jane Burke: People will change, perceptions will change, and I think we as HR professionals need to do as much as we can to educate our managers and support our staff to embrace the change. I do think employers will get on with it, and over time, we’ll be viewing age as we regard all equality and inclusion issues.
Sue Cooper: The HR function is the trailblazer, and it’s actually about the positives of it and how we make it work with the right education programmes.
Charmyn Hall: I think the real positives are about retaining experience and knowledge. I think we can use this legislation to capture the commitment of a core part of our workforce, as the needs of an older workforce will get us to think more about different workforce models and planning strategies and reinvigorating our commitments to our diversity agenda.
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