As many as two-thirds of the 3.8 million small to medium sized businesses in the UK could be leaving themselves open to costly age discrimination claims if they do not review their working practices before new regulations come into effect in October 2006.
According to an annual survey of SME managers across the UK by insurance company AXA, four out of 10 small business leaders are not even aware of the forthcoming legislation and of the third who are, more than four out of 10 have not begun to take action to address its implications.
The new Employment Equality (Age) regulations will bring age discrimination into line with laws on sex and race discrimination in employment and vocational training.
With over six 6 million people aged between 50 and state retirement age are in employment in the UK, the regulations will have a massive effect on UK small businesses, which employ almost six out of 10 workers (56 per cent) in the private sector.
Lawyers have warned that the legislation is likely to provoke a litigation bonanza because age discrimination can affect anybody of any age, meaning that all employment practices will be vulnerable to claims of ageism.
More than half of SME managers questioned by AXA expressed concern about the negative effect of increased employers' liability likely to be incurred with an older workforce, and nearly a third are worried about having to fund longer pension plans.
And while nine out of 10 small business leaders believe investment in training and mentoring courses are important to overall success, nearly a quarter felt the cost and time they would need to invest in training older workers would have a negative effect on the profitability and productivity of their business.
But despite these concerns, four out of 10 respondents agreed that the potential of an older workforce is a positive thing for UK business. Only one in seven viewed it as negative.
AXA's Lou Macari said that with 2006 marking the first year that the UK workforce would contain more 55-64 year olds than 16-24 year olds, all businesses need to adapt to support the ageing profile of the UK workforce.
"SMEs recognise that there is a great opportunity here. Older workers offer years of experience and can instil a greater sense of continuity in companies while younger workers tend to move between businesses and industries on a regular basis," he said.
"However, considerations such as training, flexible working and increased expenditure on pensions, employers' liability and healthcare insurance, will always have a more noticeable impact on cash-conscious SMEs than big corporates."
"We urge SMEs to take time to audit their employment policies and review pension schemes, retirement policies and healthcare arrangements as part of their overall planning and strategy, so they are prepared well ahead of October 2006."