Government scraps retirement age

The default retirement age (DRA) is to be abolished by October next year under new proposals put forward by the government.

Currently employers can make staff retire at 65 regardless of their circumstances. The new plans allow for a six-month transition from the existing regulations, following the announcement in the Budget that the DRA would be phased out from April 2011.

These measures, says the government, will help and encourage people to work for longer against ‘the backdrop of demographic change’. Others include reviewing when the state pension age should increase to 66 and re-establishing the link between earnings and the basic state pension. The consultation also proposes to help employers by removing the administrative burden of statutory retirement procedures, such as employees having the ‘right to request’ working beyond retirement or for employers to give them a minimum of six months notice of retirement.

The short timescale of the changes raises serious questions for employers. John Cridland, CBI deputy director-general, states: ‘Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the government has not yet addressed. This will create uncertainty among employers and staff, who do not know where they stand. 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.’

Employment relations minister Edward Davey argues that the reforms provide individuals with extra freedom and control. ‘With more and more people wanting to extend their working lives, we should not stop them just because they have reached a particular age. We want to give individuals greater choice and are moving swiftly to end discrimination of this kind.’

Steve Webb, pensions minister, suggests that many older people want to work beyond the age of 65 and have a wealth of skills and experience that are not being used.  ‘We want to get rid of the default retirement age so that if they want to work they can do so.  By spending longer in the workforce they can also have a better pension in retirement,’ he says.

The government states that it will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it, like air traffic controllers and police officers. The consultation asks whether the government could provide additional support for individuals and employers in managing without the DRA or a statutory retirement procedure, and includes the possibility of future guidance or a more formal code of practice on handling retirement discussions.

For Cridland, it’s essential that all the consequences of abolishing the retirement age are given full consideration: ‘For employers, these proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible.

‘A default retirement age helps staff think about when it is right to retire, and also enables employers to plan more confidently for the future. In certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone.’

Click here to take part in our poll, Should the retirement age be scrapped?

29 Jul 2010 | 11:00 am BST

SMEs rocked by aftershocks of recession

The bulk of British businesses are yet to return to pre-credit crunch levels of profitability.

RSM Tenon’s Business Barometer found that 70 per cent  of entrepreneurs are still waiting for their business to return to the levels seen before the financial crisis erupted in 2007.
 
Three years on and one in ten entrepreneurs (9 per cent) believe it will take at least another three years for their businesses to return to normal levels. Twenty-seven per cent predict it will take one to two years and one-fifth think two to three years is a more realistic timeframe for business levels to be restored.
 
Business-owners will be cheered to hear that RSM Tenon expects another 20,000 business failures this year. The professional services firm questioned more than 300 entrepreneurs throughout the UK, finding that the risk of a double dip recession has sparked 43 per cent of entrepreneurs to review their business.
 
Entrepreneurs are still suffering despite the recession officially coming to an end – 22 per cent see a lack of cashflow as a serious threat to their business over the next 12 months.
 
Carl Jackson, head of recovery of RSM Tenon, says: ‘Margins remain tight for businesses, with many owners still unable to secure the additional funding they need.  Further failures are inevitable in this climate and we can expect to see 2010 corporate insolvency levels match the record totals that we have seen in the last two years.’
 

27 Jul 2010 | 12:33 pm BST

Graduates choose to be their own boss

One in three students graduating this year or next has a business idea and plans to become an entrepreneur in the near future, according to a survey.

Nearly a quarter (23 per cent) of the 1,000 students surveyed by insurer Hiscox are already running money-making enterprises, or are in the process of setting them up now.

John Heaney, small and medium-sized business specialist at Hiscox, comments, 'It’s extremely encouraging that despite the knock-on effects of the recession on the job market, the best of British entrepreneurial spirit is alive and kicking amongst the next generation.'

Over a quarter of the would-be entrepreneurs among the survey's respondents plan to be running their own business by the age of 25, while a third are aiming to be their own boss before they reach 30.

Among the British entrepreneurs who started out in business before the age of 25 are Richard Branson, James Dyson and Alan Sugar.

27 Jul 2010 | 11:59 am BST

Cable trumpets ‘intense discussion’ on finance

Business secretary Vince Cable and chancellor George Osborne have launched an ‘intense discussion’ on the issue of access to finance for small businesses.

Cable and Osborne outlined the terms of discourse in Financing a Private Sector Recovery, a paper which sets out the range of finance options for different sized businesses and explores where the market is failing to provide support and if there is a role for government intervention.

Cable says: ‘I’ve heard the problems businesses are facing in getting bank loans up and down the country. They need innovative ways to access finance from other sources to grow our firms and economy. That’s why this green paper* is so important as we look to help viable firms get the money they need.’

The paper explores every major finance option, including more use of equity and encouraging venture capital and business angels to invest in a wider range of businesses. In addition to this, the paper sets out options for the finance sector, such as an insolvency moratorium on companies restructuring their debt, increasing transparency in bank loan applications and fostering competition between banks and finance institutions.

Osborne says: ‘As the economy recovers, it is crucial to ensure that the supply of finance supports rather than constrains demand and business confidence. If businesses are to play their part in promoting economic recovery it is important that they are able to access a diverse range of finance choices in a stable macroeconomic environment.’

The paper also addresses existing government schemes, such as the much maligned Enterprise Finance Guarantee programme.

A survey by the British Bankers Association recently showed that banks lent just £900 million to small businesses in 2009, which represents less than a quarter of the average lending over the past five years.

For more information about the consultation, click here

*According to Wikipedia, a Green Paper – in the lexicon of politics – means: 'A tentative government report of a proposal without any commitment to action'

27 Jul 2010 | 11:29 am BST

Employers frustrated by skills gap 

The government has set up another consultation with employers to find out how to create a more effective and skilled workforce.

John Hayes, the skills minister, launched the consultation document, Skills for Sustainable Growth, which outlines the Department for Business Innovation and Skills’ (BIS) plan to better prepare those who are 19 and over for paid employment.

Following the consultation paper, a full strategy will be published after the Spending Review in October.

Susan Anderson, CBI director for public services and skills, says: ‘We need a more simplified and effective skills system and funding support that is better focused on supporting economic growth and helping individuals develop the skills they need to enter or progress in the labour market.’

The consultation paper states that the UK urgently needs to ‘take action to meet recent concerns that the recovery in the jobs market is slowing and that so-called skills gaps in the workforce could restrict the ability of companies to take advantage of the upturn’.

Back in 2006, Lord Leitch was asked to assess the nation’s skills to see how well placed the UK is to compete in the global economy. Leitch found that ‘more than one third of adults do not hold the equivalent of a basic school-leaving qualification’ and ‘almost one half of adults (17 million) have difficulty with numbers and one seventh (five million) are not functionally literate’.

If you want to share your views with BIS on the consultation paper, click here

23 Jul 2010 | 12:37 pm BST