U.S. employers are rethinking their approach to managing the retirement patterns of their workforce, according to a new survey by Willis Towers Watson. It’s a topic we recently covered in our December issue cover story.
The 2018 Longer Working Careers Survey found the vast majority of employers (83 percent) have a significant number of employees at or nearing retirement. However, only half (53 percent) express having a good understanding of when their employees will retire. Additionally, while eight in 10 employers (81 percent) say managing the timing of their employees’ retirements is an important business issue, only 25 percent do this effectively. The survey was based on responses from 143 large U.S. employers that collectively employ 2.9 million employees.
According to the survey, 80 percent of respondents view older employees as crucial to their success. Not surprisingly, employers are concerned with the expected loss of talent. In fact, over half (54 percent) believe the loss of talent due to retiring workers will be more significant than other labor market risks over the next five years. Additionally, 50 percent expect difficulty finding workers with similar knowledge and skills over the next five years; 48 percent worry about the loss of organization-specific knowledge.
“Many employers say they are not managing the retirement of their older workers effectively,” says Alan Glickstein, managing director for retirement at Willis Towers Watson. “With growing numbers of workers either planning to retire or delaying their retirement, the stakes are high. As a result, employers are rethinking how they manage their workers’ retirement patterns and are taking action.”
The research found employers are also concerned over workers delaying retirements. Almost half (49 percent) expressed concern that delayed retirements will increase benefit costs over the next five years, while 41 percent are concerned they will increase wage and salary costs. Almost four in 10 (37 percent) worry that workers who stay on the job past normal retirement will block promotions for younger employees.
Indeed, according to the survey, a majority of employers either have adopted or plan to adopt one or more of the following strategies over the next few years:
- Wellbeing enhancements: Two-thirds of employers (66 percent) offer financial wellbeing or retirement planning programs tailored to older employees approaching retirement. Another 19 percent are either planning to offer these next year or considering these programs for 2020. More than one-third (36 percent) have modified working conditions to conform to preferences of older employees, and that is expected to increase to 43 percent by 2020.
- Flexible employment: 30 percent of respondents allow workers to change positions (e.g., shift from management to individual contributor), and this could increase to more than half by 2020. More than a quarter (27 percent) provide part-time employment, and this could increase to 45 percent by 2020.
- Consulting arrangements: Nearly half (49 percent) allow their retired employees who are collecting benefits to work as consultants or contingent workers. Another 10 percent might add this by 2020. A similar percentage hires experienced retired employees in their industry on a consulting or contingent basis.
- Phased retirement: Just one in 10 employers (9 percent) offers formal phased retirement programs, but this could grow to 23 percent by 2020. However, informal phased retirement programs are much more common, since they avoid some of the administration and compliance challenges of a formal program. Employers offer these informal phased retirement programs more often to senior workers in professional roles, and less so to those in sales, administration or hourly positions.
Older workers are clearly a sought-after resource, says Lauren Hoeck, director for retirement at Willis Towers Watson, adding that WTW research shows there is “a definite supply” of employees who would like to work into their 60s or beyond. But because many employers misunderstand their employees’ motivations and circumstances for retiring, she says, they do not have a grasp on their likely retirement patterns and are vulnerable to the workforce issues associated with employees who linger for financial reasons but have lower engagement and productivity.
We believe employers can effectively draw on the expertise of older workers,” Hoeck says, “and this opportunity will require careful management.”