The Government was facing mounting anger from business groups tonight over plans to phase out the so-called default retirement age (DRA) of 65 by October next year.
Ministers said the DRA will be "consigned to the history books", winning praise from anti-ageist campaigners who have complained that forcing someone to retire just because they reached 65 was discriminatory.
But after studying the details of today's announcement, the country's leading business groups criticised the move, warning that the timescale will give companies little time to prepare.
The Institute of Directors (IoD) said it "greatly regretted" the decision, while the CBI said business will now be left with many "unresolved" problems.
Adam Marshall, director of policy at the British Chambers of Commerce, said: "The Government has pledged to reduce the burden of employment law, but at the same time it is proposing to restrict businesses' ability to manage their workforce by phasing out the DRA.
"Many small and medium-sized firms value the DRA as it triggers a conversation about an employee's future and provides both sides with an opportunity to plan. Companies value the skills and experience of older workers, and most do keep them on, but they also value the freedom to manage their workforce."
CBI deputy director general John Cridland said: "The decision to abandon the DRA leaves business with many unresolved problems and the Government's timetable to scrap it will give companies little time to prepare.
"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."
Video: Government scraps retirement age
The Engineering Employers Federation (EEF) also criticised the "short" timescale, warning that manufacturing firms would not have enough time to prepare for such an important change.
The group also told ministers that the change could lead to an increase in employment tribunal claims from older employees who believe they have been unfairly forced to leave their job.
David Yeandle, the EEF's head of employment policy, said: "Manufacturers also need an explanation of what they feel are contradictory messages from the Government.
"On the one hand, employers are being encouraged to take on more young people to reduce youth unemployment but, on the other, the Government is making it more difficult for employers to plan for changes in their workforce by phasing out the default retirement age."
Graeme Leach, director of policy at the Institute of Directors, said: "We greatly regret the Government's decision to abolish the DRA. We do not see how the removal of a mechanism that gives employers flexibility in managing their workforce is compatible with the Government's stated desire to boost enterprise and deregulate the employment arena."
The business reaction was in sharp contrast to the views of anti-ageist campaigners and age charities which warmly welcomed the announcement as "great news."
Michelle Mitchell, Age UK charity director, said: "We have fought a four-year campaign to achieve this historic decision, so Age UK is absolutely delighted that the Government is finally setting a clear date for the abolition of this arbitrary and unfair law.
"This is a huge victory for hundreds of thousands of employees who are at risk of being forced out of their jobs simply because of their age."
TUC general secretary Brendan Barber said: "It cannot be right that workers lose their protection against arbitrary dismissal overnight because of their age.
"But we need to go further to give people real choice about how and when they retire, with new rights for flexible working. This can end the retirement cliff-edge where people work full-time one day and stop work the next. Many would prefer a phased retirement."
Employment Relations Minister Edward Davey said: "With more and more people wanting to extend their working lives, we should not stop them just because they have reached a particular age."
The Government added that by working longer, people who have better pensions in retirement.
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