Faced with a significant number of employees at or nearing retirement, and the resulting loss of valuable older workers, U.S. employers are rethinking their approach to managing the retirement patterns of their workforces, according to a new survey by the global advisory, broking, and solutions company Willis Towers Watson.
The 2018 Longer Working Careers Survey found the vast majority of employers (83%) have a significant number of employees at or nearing retirement. However, only half (53%) express having a good understanding of when their employees will retire. Additionally, while eight in 10 employers (81%) say managing the timing of their employees’ retirements is an important business issue, only 25% do this effectively.
According to the survey, 80% 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%) 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% expect difficulty finding workers with similar knowledge and skills over the next five years; 48% worry about the loss of organization-specific knowledge.
“Many employers say they are not managing the retirement of their older workers effectively,” said Alan Glickstein, managing director, Retirement, at Willis Towers Watson. The research found employers are also concerned over workers delaying retirements.
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%) offer financial wellbeing or retirement planning programs tailored to older employees approaching retirement. Another 19% are either planning to offer these next year or considering these programs for 2020.
Flexible employment: 30% 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%) provides part-time employment, and this could increase to 45% by 2020.
Consulting arrangements: Nearly half (49%) allow their retired employees who are collecting benefits to work as consultants or contingent workers. Another 10% 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%) offers formal phased retirement programs, but this could grow to 23% 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, and the research shows there is a definite supply of employees who would like to work into their 60s or beyond. Many employers misunderstand their employees' motivations and circumstances for retiring. 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, according to Willis Towers Watson. “We believe employers can effectively draw on the expertise of older workers, and this opportunity will require careful management,” said Lauren Hoeck, director, Retirement, Willis Towers Watson.