The double pressures of an ageing population and low unemployment levels means the risk of a UK labour shortage in future is high. This is a major ‘talent’ issue for many small and medium sized business owners.
The facts from the Office of National Statistics (click here) are impossible to ignore: digging into this data in 2018 insurer Aviva estimated that 7m new workers will likely enter the UK labour market between 2019-2029.
But Aviva also estimated that 10m workers could leave. That is a shortfall of 3m workers. Which means employers will increasingly need to attract and retain older workers in future.
“We can no longer justify this waste of talent, experience and expertise,” Alistair McQueen, Aviva’s head of savings and retirement said at the time. “This is not good for our people, nor for the competitiveness of the UK on the global stage.”
The case for supporting – and retaining – talent for your business
We live increasingly in a world where staff – often higher performers – switch jobs more often, with less impact on themselves and rather more impact on the business they leave. Low unemployment, helped by rising self-employment and ‘flexible working’, continue to heighten employer labour shortage risk.
For older workers who possess industry-specific knowledge and experience – not to mention wide networks – phased retirement offers clear employer benefits. A new hire, in contrast, takes time to accumulate job depth experience.
Analysis from Oxford Economics found that just the cost of replacing a single member of staff was more than £30,000 for the average UK employer in 2014 – a staggering amount. This includes agency fees, advertising costs, HR and management time “and the possibility of hiring temps before the new role started”.
Within an increasingly mobile and quick-moving global economy, retaining talent takes on a more strategic urgency.
Opportunities and safeguards of phased retirement
- An older worker’s value is balanced against losing their experience and ‘know-how’. Their insight is built up over decades, in some cases. Once gone it may be forever. Think carefully about how their insight is kept alive because phased retirement allows you to to continue to access their expertise and insights while not having to pay a full-time salary
- Going external to hire high quality consultants on day rates is very expensive. So phased retirement can be benchmarked against external consultants – not necessarily your current workforce
- A ‘leaner’ work environment means more companies outsource projects to the self-employed – another option to flag up to ‘leavers’. Self-employment for those 50-plus rises with age, according to the Chartered Institute of Personnel and Development
The demographics UK crisis in numbers
- In 1997 one in every six people (15.9%) were aged 65 years and over
- By 2017 this increased to one in every five people (18.2%)
- It is projected to reach around one in every four people (24%) by 2037
By 2041 the 1960s baby boomers will have progressed into their 70s and 80s says the ONS “and by 2066 there could be an additional 8.6 million people aged 65 years and over in the UK – a population roughly the size of present-day London.”
It adds: “This would take the UK’s 65 years and over age group to 20.4 million people, accounting for 26.5% of the projected population.”
What are the phased retirement benefits for employees?
- Phased retirement can be highly tax-efficient for your staff. When done well it enables your employees to have more control over their pension income
- This can demonstrate the value of an employer’s pension contribution – especially useful if it is generous
- It shows staff that a reliable and structured program can be relied on. They do not have to spend time researching the options
- Staff can continue to work and enjoy their role but at a pace they prefer – perhaps right up to the ‘traditional’ retirement age
The non-financial reasons are compelling
Phased retirement isn’t always about working less. For many it’s about working more effectively and productively. Which might mean working for longer – at the right pace for your employee.
Which means keeping talent meaningfully for longer, often. There can be substantial non-financial benefits. “Evidence shows that it [working longer] gives people increased resilience in later life and those in employment perform best on almost every measure of cognitive function,” says a Government Office for Science report.
It added: “Studies have found that working can have health benefits, particularly for people with mental health issues”.
Do check your legal issues carefully
Talking to employees about plans for the future is of course a highly sensitive area. The labour market, by default, is often ‘ageist’. However an employee appraisal may be a chance to discuss the longer term picture. It’s also a chance to talk about how staff feel about their role now.
For an employer, this is an opportunity to outline future business plans – and to help smooth a way, perhaps identifying future work preferences, that might suit their wider hopes and ambitions.
Talking specifically about retirement is fine for both employee and employer if the employee volunteers information on the issue, as opposed to being specifically asked about it by a member of staff (just to be aware).
What about developing your own HR policy on this issue?
Do bear in mind:
- There is no default retirement age in most roles. Most salaried employees decide when to stop working – a personal choice
- According to government research the majority of over 50s do not want to stop work altogether. Many want to continue to work till 65-70 but on a part-time or flexible basis
- Since 1950 life expectancy overall has risen by 13 years, and life expectancy at 65 by seven years. None of these extra years are spent in work, according to the Chartered Institute of Personnel and Development
- The UK’s Centre for Ageing Better estimates the number of people aged 65 and over in the UK will climb 40% within the next 20 years – a huge change
- A request for flexible working is a legal right for any employee with a minimum of 26 weeks’ continuous service
- Flexible working applies to both full-time and part-time employees
One last thing…
Phased retirement plans often demonstrate a sense of trust and shared values. They tell employees that their efforts and skills are deeply valued above and beyond the profits your business creates. Such plans also meaningfully support the goals of your employees, creating a greater personal connection to their own lives.
Phased retirement, then, is about treating people as long-term trusted partners – wherever your business lies.