George Osbourne announced in the budget 2010 that consultations will soon begin on whether to remove the Default Retirement Age (“DRA”), but as reported here, Treasury documents indicate that the coalition Government is already committed to abolish it.

However, the Confederation of British Industry (“CBI”) warns that this could cause significant difficulties for business. In the “Making Britain the place to work” report published the day before the budget (available here), the CBI states that “the DRA is an essential part of employment practice, enabling businesses to plan and develop their workforces.”

The CBI believes that without the DRA, workforce planning, staff development and business innovation would become harder with an increased risk of age-based litigation. Managing the transition to retirement would be more difficult for firms and employees, who might eventually have to be dismissed on competence grounds even where they have a long history of good work with the company – a very undignified exit for a once good worker.

The CBI is calling for an alternative framework to be developed to either remodel or replace the DRA. It wants the coalition government to address the practical concerns of business in this area, as a vacuum will only create uncertainty for employers and employees, and calls for a debate about how people retire and what the correct legislative structure should be to smooth the transition.

The CBI also states that “if the government remains determined to press ahead with phasing-out the DRA, the CBI will work with it to highlight the practical issues and to help explore alternative frameworks that address businesses’ legitimate concerns.”