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While employers are cognizant of their workforce demographics, they don’t quite have a good understanding of when their workers will retire. Thus, U.S. employers are rethinking their approach to managing the retirement patterns of their workforces, according to a new survey by Willis Towers Watson.
The 2018 “Longer Working Careers Survey” found that 83% of employers have a significant number of employees at or nearing retirement. However, only 53% express having a good understanding of when their employees will retire. Additionally, while eight in 10 employers (81%) said 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%) think the loss of talent due to retiring workers will be more significant than other labor market risks in the next five years. Additionally, 50% expect difficulty finding workers with similar knowledge and skills in 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 of 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 about workers delaying retirements. Almost half (49%) expressed concern that delayed retirements will increase benefit costs the next five years, while 41% are concerned they will increase wage and salary costs. Almost four in 10 (37%) 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 the next few years:
- Well-being enhancements. Two-thirds of employers (66%) offer financial well-being 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. More than one-third (36%) have modified working conditions to conform to preferences of older employees and that is expected to increase to 43% by 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%) provide 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. One in 10 employers (9%) offer formal phased retirement programs, but this could grow to 23% by 2020. However, informal phased retirement programs are much more common because 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.