Business lobby shuns retirement age change

Government plans to scrap the default retirement age will hamper the efforts of businesses to beat the recession and risk causing rifts among staff, employers claimed.

In a push to adapt employment laws to the costs of longer life expectancies, the government has outlined plans to phase out the retirement age of 65 by October 2011. Employers will lose the option to make staff retire at 65, a change one business group described as risking a slew of tribunal cases. Others argued it would make it harder for companies to plan, piling further uncertainty on firms worried about tax rises, spending cuts and the fragile economic recovery.

"The government has pledged to reduce the burden of employment law, but at the same time it is proposing to restrict businesses' ability to manage the workforce by phasing out the default retirement age," said Adam Marshall, director of policy at the British Chambers of Commerce.

The BCC and other business groups deny they oppose the retirement age rising to keep pace with people living longer and the pension and healthcare costs that entails. But merely scrapping the old system and not replacing it with a new framework risks confusion, they say. Condemning the government's approach, John Cridland, deputy director general of the business lobby group the CBI, said: "There will need to be more than a code of practice to address these practical issues; we will need changes in the law to deal more effectively with difficult employment situations."

The coalition government has pledged to give companies more flexibility and to help them grow as it seeks to rebalance the economy away from the public sector to the private sector. But the Institute of Directors has been critical of the retirement proposals as being at odds with that rhetoric.

"Instead of removing one of the few flexible mechanisms left to employers, the government should be examining how it can make it easier for businesses to employ people so that jobs lost in the public sector can be replaced with jobs in the private sector," said the group's director of policy Graeme Leach.

But the HR professionals group, the Chartered Institute of Personnel and Development, welcomed the latest proposals. Its diversity adviser Dianah Worman said: "Our research has shown that many employees wish to work past retirement for differing reasons and many employers are already benefiting from allowing such flexibility. We would encourage all employers to look at the potential cost saving benefits of continued good practice and management of their older workforce."

Source the Guardian