In the good old days, when someone came of retirement age, they were given a commemorative watch and kicked out of the door into a life of playing golf and watching Countdown.

Now, after the default retirement age was scrapped by the coalition government in October 2011, a move welcomed by anti-age discrimination campaigners, employers across Britain are facing the dilemma of how to get rid of underperforming older workers without facing age discrimination action.

"There is nothing wrong in having conversations with your employees about business expectations - provided you treat all employees the same," said Marc Jones, an employment law specialist at Turbervilles, speaking to the International Business Times UK.

"Having those conversations is not less favourable treatment to a particular age group and therefore cannot founder a claim for age discrimination."

Burdened by a rising cost of living and a diminishing pension value, with record-low interest rates, quantitative easing and government cuts, as well as a longer life expectancy, many elderly people are forced to work past what was once the default retirement age of 65-years-old just to afford to live.

Britain's ageing and expanding population is set to have more than double the number of over 85s within 25 years, at 3.5m.

The number of centenarians is predicted to rise from 13,000 in 2010 to 110,000 in 2035.

Recent data from the Office of National Statistics (ONS) revealed that across the past decade there has been an increase of 385,000 pension-age workers in Britain - double what it was in the late 1990s.

Along with age inevitably comes, for many though certainly not all, a natural descent from a youthly pinnacle: both physically and mentally.

What is more, these lesser-productive grey-haired job-hoggers keep younger generations out of work, meaning firms will struggle to find fresh, revitalising blood for their businesses.

How can businesses avoid age discrimination?

So how exactly can businesses handle the complex legal and ethical issues around an older workforce?

"What has happened in the past, especially with an older workforce and when we have had default retirement ages, non-performing employees of a certain age have simply been allowed to coast rather than be performance managed to their retirement date," Jones said.

"What needs to happen is that they need to be managed in the same way as you performance manage any other employee in the business, regardless of age."

By setting targets, anyone who is not meeting the agreed standards can be reasonably dismissed on the basis of poor performance, ensuring that any workers - including older staff who are no longer up to the tasks in hand - can be lawfully pushed out and make way for a better employee.

"There is a caveat with an older workforce and that is along with age comes the possibility of physical and mental impairment," Jones added.

"If that physical or mental impairment has a substantial adverse effect on that employee's day-to-day activities then that could be a disability within the meaning under section six of the Equality Act."

A compulsory retirement age

Compulsory retirement ages written into contracts are entirely lawful, even though there is no default retirement age, but companies need to follow guidance from established case law.

A company must be able to objectively justify having a compulsory retirement age, else risk being taken to court on accusations of acting arbitrarily.

This is articulated in the judgment from Seldon v Clarkson at the Supreme Court.

Seldon v Clarkson

Anthony Seldon was an equity partner in solicitor firm Clarkson Wright and Jakes.

When approaching his 65th birthday and the date on which he was contractually obliged to retire, Seldon felt he needed, for financial reasons, to continue working.

The firm did not allow him to continue and so Seldon took legal action claiming direct age discrimination.

However Lady Hale of the Supreme Court found in the firm's favour after it argued that succession planning, which means older partners leaving to make way for the younger partners, is a justifiable reason for having a compulsory retirement age.

Despite this judgment, the Supreme Court referred the case back to the Employment Tribunal, which will rule on whether 65 is a proportionate age at which to set compulsory retirement.

So compulsory retirement ages remain legal, but must be objectively justified and pending the Employment Tribunal's ruling, possibly proportionate, too.

"What firms would need to do is set out in writing the reason why, collate evidence in support of this reason, and consider if there is an alternative, less discriminatory way, of achieving the same result," Jones said.

"If they can do that then they are half way there."