Now you might never admit it, but the suggestion that some of your current employees will be working for you into their seventies may be a cause for concern. The reality is that a regular influx of new people is often vital in keeping a young business moving forward.
It is now unlawful for an employer to set a default retirement age. It’s also unlawful to harass or victimise employees on the grounds of their age. A few ‘old timer’ gags along with an invitation to a retirement seminar and you could find yourself in an employment tribunal.
Strictly speaking, the removal of the default retirement age doesn’t mean an employer can’t ever retire an employee. Forced retirement can be ‘objectively justified’, but passing this test is proving tricky. The decision in a recent case has laid down some demanding criteria; for instance, any justification should be of a ‘public interest nature’ and not specific to the particular needs of the employer enforcing the retirement.
Redundancy isn’t likely to be an option, either. A role obviously has to actually be redundant or you are back in the middle of discrimination territory.
You could pay through the nose and offer a generous pension scheme but that’s an expensive option without necessarily guaranteeing results.
So, if your hands, as an employer, are somewhat tied, we turn to the employee. Will they retire of their own accord? Having spoken to countless employees about their desire to retire, I would suggest most would be willing to do so when they can afford to retire.
As George Foreman famously said, ‘The question isn’t at what age I want to retire, it’s at what income.’
With the age at which individuals receive a state pension on the rise, the question now becomes whether employees will make the right financial choices to fund their own retirement. The government has got involved to increase the chances.
‘Auto enrolment’ is a ‘new law (which) means that every employer must automatically enrol workers into a workplace pension scheme if they: are aged between 22 and State Pension age; earn more than £8,105 a year (in 2012/2013) and work in the UK.’
More on retirement and the workplace:
Smaller businesses won’t be impacted by this law for a while, but every business with less than 50 employees will still need to comply with the legislation at some point between 1 June 2015 and 1April 2017. That said, it will take a very long time before this new legislation has a material impact on when an employee chooses to retire.
Inevitably some employees will prepare well for retirement and some won’t. Those who haven’t may previously have relied on getting advice to plan an employment exit strategy. The earlier suggestion of a new landscape for financial advice refers to the results of the FSA’s Retail Distribution Review (RDR). Financial advice has never been free and, in the past, it was not always clear how advisers were paid. Since 1 January 2013, instead of an adviser being paid commission, they now have to explain how much advice will cost and agree a set fee with each customer or a percentage of any money invested.
In the long term, this has to be a good thing, but in the short term, there is plenty of commentary out there that members of the public will not be willing to pay professional service level fees for financial advice. Cue a groundswell supporting increased ‘DIY financial planning’, which may have some interesting consequences.
Strangely, this idea of ‘DIY financial planning’ is where I start to see a solution to the retirement problem. If you as an employer can encourage and influence good financial choices by your workforce, you will increase the chances of their personal goals (one of which will be to retire at a reasonable age) being met.
Employer-sponsored financial education is a cheaper alternative to employer-sponsored financial advice, but do be aware that there is good and bad workplace education out there. I will, therefore, leave you with three short golden rules to ensuring any workplace education you employ is effective in meeting the aforementioned need:
1) Avoid the use of the word ‘retirement’ in any invitations
The focus of any education activity should be on planning for the future, not the period after you have stopped working for this business.
2) Any effort should focus on what employees want to achieve in the future
Education is unlikely to work where the content is dry and fact-heavy. You’ll want employer benefits to be mentioned, but this should be a secondary message as a solution to an identified need.
3) A single event is unlikely to work
Education doesn’t always lead to action, and it rarely does if there is not some form of follow-up or prompt. Think in terms of an on-going process if the message is really going to sink in.