Employees can generally retire when they want to.
To help with your workforce planning, if you don't already do so, you should consider setting up regular individual informal workplace discussions with all employees.
Then, when you are having such discussions with older employees, you may get the opportunity to raise the issue of their future plans, which may include plans to retire.
However, any direct question such as "are you planning to retire in the near future?" is best avoided. If the employee indicates they wish to retire, there is no problem in you talking to them about the date of their retirement and any working arrangements leading up to it.
You can only operate a compulsory retirement age if you can objectively justify it. Justification of direct age discrimination must be based in ‘social policy objectives’ such as those related to employment policy, the labour market or vocational training. This means that the aims must be of a ‘public interest nature’ rather than purely individual reasons particular to one employer’s situation.
The first thing you would need to do is ask yourself why you need a compulsory retirement age. Set out your reasons clearly on paper.
You should then ask the following questions:
- Do you have real hard evidence which can justify your reasoning or is it just based on a preference or assumption?
- Are there easier, simpler non-discriminatory ways of achieving the same results?
As well as establishing a legitimate aim an employer would also need to demonstrate that the compulsory retirement age is a proportionate means of achieving that aim.
The test of objective justification is not an easy one to pass and it would be necessary to provide evidence if challenged at a tribunal (or under the Labour Relations Agency Arbitration Scheme which can now be used as an alternative forum for resolving disputes); assertions alone would not be enough.
If you do operate a compulsory retirement age that you can objectively justify, you must follow at least the minimum statutory disciplinary and dismissal procedure. This means:
- giving the employee plenty of notice of the date you intend to retire them
- arranging a meeting to discuss their retirement
- considering any request they make to work beyond the compulsory retirement
- allowing them an appeal if they do not accept your decision
You can also still dismiss an employee of any age on, for example, the grounds of:
- Capability, eg where they have been absent for a long time due to ill-health or - despite you giving them opportunities to improve - their performance is not up to standard. Good procedures are vital here. See the Labour Relations Agency's Code of Practice on disciplinary and grievance procedures.
- Redundancy, ie where there is no longer work for the employee to do.
Read more on dismissing employees.
Pay and pensions
Whatever date the employee retires, during the employee's final few weeks of work, you will also need to:
- calculate their final payment - see pay - an overview of obligations
- calculate any entitlements due under employee share or share option schemes - particularly relevant regarding early retirement - read GOV.UK guidance on early retirement
- check the rules of their pension scheme - see pensions and retirement
Emotional and practical issues
Even though an employee can generally choose when to retire, preparing for retirement may still be a difficult time emotionally for them.
Therefore, you should consider helping them in the run-up to their retirement - see providing support for a retiring employee.
Remember that you may also need to retrieve company property, eg security pass, company car, laptop computer.