The new Government this week said it intended to press ahead with the previous administration’s plans to remove an employer’s option to retire staff at the age of 65. If the proposal goes ahead, businesses could be forced to start keeping on staff indefinitely in little over a year’s time.

This could prove highly damaging to thousands of small firms. Currently, there is nothing to stop an employee working on past 65, providing his or her employer agrees to it. Many businesses are well aware of the skills and experience older workers provide and are happy to maintain their employment.

However, if the default retirement age is scrapped, business owners will be forced to keep on workers past the age of 65, whether they want to or not.

This will prove a huge problem for thousands of small firms, hampering their abilities to plan for the future. The move could also open the door to costly and painful employment tribunals, as an employers’ only means of ending employment will be through a ‘capability dismissal’ based on the declining competence of the worker.

In recent survey, just 4% felt removing the default retirement age was justifiable. I am by no means disputing the valuable skills and experience older people bring to the workplace. Many small businesses are happy to keep on members of staff well into their late 60s and 70s – indeed, many Forum members themselves are well over 65.

However, removal of the default retirement age will cripple some small businesses by removing the tools that help them to plan for the future. Most employees are certainly competent enough to work beyond the age of 65 without a significant deterioration in their abilities. However, for those employees not willing to leave voluntarily, there will eventually come a time when the needs of the business will have to be considered.

In the absence of a default retirement age, the only viable option available to an employer is a capability dismissal based on the declining competence of the worker. We believe this would be an undignified and humiliating end to a career for most staff.

Stuart Mitchell, of Derbyshire-based Machine Building Systems, agrees. He said: “What this proposal will do is to force employers into a situation where they have to spend huge amounts of time taking older employees through a disciplinary process in order to end their employment.

“Many an employer has allowed someone a dignified retirement because although they were not really up to the job any more, it was only a matter of waiting a few months or a year, and the problem would resolve itself happily.

“Once this rule comes in, that will be pointless and they might as well start the unpleasant and costly disciplinary process straight away as it will be inevitable at some stage. What effect will huge numbers of these disciplinary proceedings have on the morale of the other employees? Never mind that of the boss who does not enjoy the process any more than anyone else.”

Mr Mitchell added: “Employers are people too, and their morale is of vital importance. To deliberately and knowingly set up avoidable conflicts, is a stupid way to govern.”

I set out my views on the issue in response to a Government consultation in February, emphasising the need for small firms to be able to plan ahead, especially during times of economic uncertainty. Also, just last year, the Government defended the default retirement age in the High Court, arguing that it brings numerous social benefits.