Enabling and Promoting the Age-Ready Workforce
See how progressive employers are optimizing their workforce performance through age-ready initiatives and career development.
By Neil Lloyd, Head of US Defined Contribution and Financial Wellness Research, Mercer
In a previous blog post, I interviewed Amy Laverock, who co-authored a paper titled, Health is Vital to Wealth, building off an extensive research effort into wellness that Mercer undertook in 2018. (Amy leads global strategic initiatives for Mercer Marsh Benefits.) In that blog, we touched on how readily employers are embracing the emerging “Are you age-ready?” point of view regarding extending the tenure of the workforce.
Smart employers can optimize their workforce performance by capturing the value of age and experience in a changing world of work. I recently was fortunate to be able to connect with Yvonne Sonsino, a Global Co-leader, Next Stage at Mercer in the United Kingdom, and get her perspective on some of the wide-ranging conversations she’s been having with progressive employers around the world in this regard, including implications for career development and longevity.
The interview has been lightly edited for length and clarity.
Neil: Yvonne, the subject of phased retirements has been getting a lot of attention these days within the benefits industry. Could you give some background on some of the discussions that you’ve had with clients? I believe the complexities of phased retirements have been coming up.
Yvonne: We’ve been talking to lots of organizations about phased retirement for some years. There’s a real change in the air. More of our clients have pulled their data together, they’re starting to analyze their own demographic profiles, they’re starting to feel and measure and document pain points, and they’re asking for help.
And it’s really interesting to see the linkage between phased retirement with the growing number of companies offering flexible work arrangements. Flexibility works for all generations; everybody needs and wants it. But building it into a phased retirement program could give companies and employees a real lifeline in later stages of life. It helps move people out of the full-time, permanent, working model into a more elegant transition into retirement.
Neil: Is there much research out there on phased retirements? What are other countries doing that might have a bearing on how we might conduct phased programs in the U.S.?
Yvonne: Unfortunately, there aren’t many good sources of data available on phased retirement programs, which have been sporadic. They’re mostly informal programs, one-off arrangements that companies have put in place for certain individuals. Nothing has really emerged as a best practice yet. If you think about it, integrating a phased retirement program with a flexible working program, done carefully, could be really helpful. Looking at this question globally, the design of a phased retirement program may mean you need to examine the company pension plans to make sure they allow transition. Can people “early-retire” while drawing from their retirement plan and continuing to work?
In certain geographies, retirement plans enable flexibility; in others, it might require rule changes. In the U.K. it is possible to retire, draw a pension, and carry on working either in a full-time or part-time capacity. It aligns with the way companies are looking at transitioning to new career paths and the future of work.
In other countries, where there are nationally sponsored pension programs, it’s possible in many instances for workers to defer their pensions. There are increased payouts and tax advantages for workers who defer taking distributions until they fully retire, much as it is possible in the U.S. for workers to delay taking Social Security.
Of course, plan sponsors will need to look at employment contracts and policies and take the right advice before they can implement phased retirement programs.
Neil: There certainly can be advantages to people working longer at an employer. But isn’t one of the negatives the health perspective, and its implications for cost management?
Yvonne: Our research shows that if your working population is 10 years older than today, then that will double your health costs — specifically, health and insurance costs. And that has pretty big implications, because it’s an increasing cost that will incrementally just ramp up. Whether HR departments and finance departments have built that into their budgeting process is questionable. I don’t think they would have been looking at the impact of age on their health insurance costs. But they should. It’s easy to do.
Neil: What might management teams do to prepare for the increased benefit costs associated with an older workforce?
Yvonne: They could redesign programs by keeping in mind that increasing cost mitigation. For example, older workers don’t necessarily have the same level of debt in later life as they did when they were younger. So, do they really need as much life insurance and coverage as they did in their younger lives? There could be an opportunity to redesign benefit programs and also to make sure that some of the conditions that are emerging as workforces age, such as multiple chronic conditions and comorbidity conditions, are adequately covered.
We’re working with a client at the moment who had an employee still working at 72 who died, and the insurance policy wouldn’t pay. The policy had finished at 66. And that was a hidden cost that the company wasn’t aware of. In another case, they have an employee who is in his 80s and has multiple, complex health issues. They don’t know whether those issues are covered by their policies, and are unclear about what his employment conditions promise, as he has been at the firm for so long. One approach we’re looking at is helping them document an age management strategy and upgrade their insurance policies to reflect the older population and think about cost-mitigation at the same time.
Neil: The whole concept of an age-ready workforce must have implications for career development as well. What are you seeing in this area, Yvonne?
Yvonne: We’ve been doing a number of focus groups, talking to workers over age 50, to find out what they want from their future career. Conventional thinking and practice have been that older workers don’t want or need any training or development. They’ve had enough. They’re working their way toward retirement.
But our focus groups showed markedly different results. There’s a very high percentage of people who have said, “I want to work differently in the future” — in fact, at one employer, 93% of respondents said this.
What did they mean by “differently”? Half of them said, “I’m ready to flex down a little bit. I still like my job, but I don’t want to be doing 9 to 5 every day. There are other things I want to do: go back to school, start my own business, take care of family members, or improve my golf handicap.”
The other half said, “We’re ready for our next challenge. We’re ready to re-learn; we’re ready for a next phase of life.” And they’re already actively pursuing master’s degrees, computer science courses, arts programs, all sorts of different things. So, they’ve already started to gain new skills. It would be really interesting to understand whether employers are ready to embrace that appetite for change. If they do, they’re going to unleash a heap of motivation and engagement. We know that increased happiness and increased engagement at work leads to better productivity. Employers would be well advised to start asking their workforce what they want.
Neil: What tools or frameworks does Mercer offer employers to facilitate these assessments and implement career-development programs for older workers?
Yvonne: We’re exploring offering a new employment model that combines a flexible working contract with a new reward structure and some employee-benefit protection. This model may not offer the same security as traditional programs for full-time permanent employees, but it will offer more than what gig workers or platform workers receive. It will include training and development opportunities to move into new roles, even into new digital roles that do not yet exist necessarily, to motivate a whole new pool of experienced workers. The employer can use this model to create an elastic pool of resources to scale up or scale down as demand in that business rises and falls.
We have at least two big global companies that are working with us at the moment, and they are gaining significant traction with the model. Employees in the focus groups we’ve done so far in Europe are interested in the model and highly motivated to explore it. Employers can even trim costs because they don’t have to fire people in redundant roles, and they don’t have to subsequently backfill some of these new skills — they can reskill and transition existing employees instead. This is one of the most exciting areas that we can start to explore in the longevity arena.
Neil: Yvonne, any final words of wisdom about the age-ready issue?
Yvonne: The work that’s happening in life sciences around the globe is remarkable. It won’t be long before the number of active centenarians — many of whom will be working — tips the longevity scales in a meaningful way. I think there is a lot of work that we as an industry need to do to prepare for that possibility, working in concert with employers, futurists, regulators, healthcare professionals, and social scientists. It’s a profoundly complicated problem, with lots of implications for our society and quality of life.
Neil: Thanks for your time, Yvonne.
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