(This post originally appeared on The Guardian)
The American workforce is getting older. In fact, by 2024 the Bureau of Labor Statistics estimates that 25% of the US workforce will be composed of workers over the age of 55, and a third of those workers will be older than 65. The reasons, for the most part, are due to the country’s overall ageing population as a result of declining birth rates and better life expectancy. But there’s also something else going on. Employees are not only working longer because they can. They’re working longer because they have to. Retirement savings are just not keeping up.
This is both a good thing and a challenge for employers. On the one hand, older employees bring experience, loyalty, stability and reliability to the office, particularly in these times of low unemployment and a tight labor market. But these same employees also require a different kind of approach to not only keep them productive and valuable while working, but also to ensure that they can smoothly transition to retirement without becoming a financial burden to their employers.
“Many employers misunderstand their employees’ motivations and circumstances for retiring,” says Lauren Hoeck, director, retirement, at the advisory firm Willis Towers Watson. “Therefore 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.”
A new study of 143 large US employers that collectively employ 2.9 million employees from Willis Towers Watson reinforces this fact. According to its 2018 longer working careers survey, the vast majority of employers (83%) have a significant number of employees at or nearing retirement. However, only half express having a good understanding of when their employees will retire. Additionally, while eight in 10 employers say managing the timing of their employees’ retirements is an important business issue, only 25% do this effectively.
The days of an employee turning 65, getting a watch and being ushered into a new world of golf, retirement communities and early-bird specials are slowly disappearing. Today’s employers are changing their attitudes towards their older workers. They’re becoming more focused on transitioning these employees towards retirement with strategies that include flexible employment hours and positions, an increase in “wellbeing” benefits that better prepare older workers financially for the future and an increase in consulting arrangements that offer older employees the chance to share their expertise while still being off the payroll.
These strategies are especially critical for small employers. I’ve witnessed many clients who have been asked to provide additional financial help for older employers that don’t have enough put away for retirement. Most have offered this help – which have included anything from part-time work arrangements to handouts as a measure of their loyalty and friendship. But unfortunately, loyalty and friendship can only go so far and a small employer who’s not prepared to deal with an ageing workforce may find himself facing unplanned costs that could impact profitability and growth.