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Last Updated: Friday, 29 September 2006, 06:50 GMT 07:50 UK
Problems loom for small businesses
Analysis
By Alan Tyrrell
Federation of Small Businesses (FSB)

Small businesses could be forgiven for feeling anxious about the introduction on Sunday, 1 October, of laws that will make discrimination on the grounds of age illegal.

Alan Tyrrell, Federation of Small Businesses
Many small businesses are ignorant of the new laws, says Alan Tyrrell

The implications of these regulations will be wide-ranging.

Employers must ensure that all areas of the employment cycle - recruitment, training and development, promotion, redundancy and retirement - operate without an age bias.

The Federation of Small Businesses has warned that many smaller companies are unprepared for the new regulations and as a result could find themselves facing costly legal claims.

In Ireland, which has had age discrimination legislation in place since 1998, 22% of all discrimination cases are brought on age grounds.

Extreme care will also have to be taken when advertising job vacancies

Already applications to employment tribunals under existing employment legislation have nearly trebled in the UK over the past 10 years.

Many FSB members settle out of court to avoid defence costs, even though they feel they have a good case.

For the smallest businesses, losing a case at tribunal can mean the difference between business survival and failure.

What will the regulations mean?

It will be illegal to discriminate on the basis of age unless there is a genuine occupational requirement, for example that bar staff serving alcohol must be at least 18, or if there is an objective justification.

The test of 'objective justification', means employers will have to show with evidence that they are pursuing a legitimate aim and that ageism is an appropriate and necessary means of achieving that aim.

There will be a national default retirement age of 65 and any dismissal for retirement at an earlier age will be unlawful unless justified.

Retirement at 65 will only be lawful if the correct procedure including a 'duty to consider a request to continue working' has been followed.

Where an extension of work is agreed, the duty to consider will remain in place when retirement is next considered.

Not following this procedure could result in compensation of up to eight weeks pay or an automatically unfair dismissal, depending on the extent of the failure.

Job adverts

Extreme care will also have to be taken when advertising job vacancies.

Steptoe & Son
It will be more difficult to force older workers to retire

Businesses will have to consider where advertisements are placed in case this could effectively exclude a particular age group.

They will have to ensure that the wording used in advertisements does not give the impression that applicants from a particular age group will be favoured such as by asking for a "mature" or "young and dynamic" person.

Certain qualification requirements could also have a discriminatory effect - for example, asking for relatively recently created qualifications, such as media studies.

Many will view this as just another area in which red tape and over-regulation is tightening its grip on the UK's small businesses.

The reality is that large organisations have the capacity and resources to continually monitor regulatory developments and adapt their businesses practices to suit.

Small businesses - many without any specialist human resources support whatsoever - do not.

Not ready yet

It is therefore unsurprising that worrying numbers of businesses are not ready for the age laws and could find themselves in trouble once October has passed.

Small businesses could face costly legal action

In a survey carried out by the FSB, 14% of members responding were completely unaware of the regulations and almost a quarter were aware of the regulations but did not understand what they would mean for their businesses.

This echoes findings of new research by the Age Partnership Group, which represents business, trade unions and government, relating to the recruitment, training and retention of older workers in UK businesses.

The Age Partnership Group investigated nine sectors of the economy.

It found that eight of the sectors relied on length of experience when fixing salaries and in the selection and retention of staff, while seven of the sectors used age or length of service as a basis for making decisions about redundancies.

Complexity

No honest employer would advocate intentionally discriminatory practices and the business case for an age diverse workforce is clear.

Many small businesses rely on older worker's skills and experience.

Flexible retirement is already common in smaller businesses, alongside more informal working practices that suit workers towards the ends of their careers.

However the UK Regulations go further than the European Directive requires.

The real risk is that the complexity of these regulations and the new bureaucratic retirement process will mean that small businesses could face costly legal action.

This might not be for genuinely discriminatory behaviour but for an administrative or procedural mistake or minor misunderstanding of the law.

Ultimately, this could be detrimental to the UK economy and not true to the spirit in which the law is intended.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.


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