By Deborah Moon, Reward blogger
The social, economic and employment implications arising from the demographic shift in the UK’s population and workforce, with more people living and working longer, is a much reported and debated topic. Terms such as “generation X, Y and Z”, “baby boomers” and “empty nesters” have become well-used phrases as employers and HR professionals consider the impact of greater multi-generational working and how best to plan for and respond to this.
It is clear that, as the number of employees seeking to extend their working lives, either by choice or necessity, continues to increase, employers need to become much more adept at managing an age-diverse workforce. The abolition of the default retirement age and introduction of pensions auto-enrolment have brought with them new challenges for HR and reward professionals. The reforms to pension arrangements which were announced by the Chancellor in the recent budget will add yet another dimension to this increasingly complex picture.
A recent CIPD report, Managing an age-diverse workforce: employer and employee views, explored some of the issues surrounding this subject and considered the benefits to both employers and employees, the challenges faced and how well employers are dealing with them. The report illustrated how the trend for working longer rather than retiring is set to grow, with workforces which span four generations, or “4G workforces” becoming increasingly more common. However, somewhat concerningly, the report also found that many employers seem unprepared for this demographic shift, with most likely to deal with issues in a reactive way, as they arise, rather than having a defined strategy for managing an ageing workforce. As the report reflects, whilst there appears to be a general recognition of the benefits workers from different generations can bring, many employers are failing to capitalise on these through the lack of a proactive and coherent approach.
The report found that the most common age bracket for retiring is now 66-70, with economic independence identified by respondent employees as the main benefit of extending their working life, but with an apparent lack of provision from employers to help support and manage this. It would seem that helping employees understand the impact of living and working longer (and longer....) and the importance of proper and adequate preparation and planning, is increasingly becoming one of the major considerations of our time.
Having a comprehensive understanding of the composition of the workforce, understanding needs and expectations at different stages of their working lives, and helping them make informed choices to enable lifestyle aspirations, both current and future, has always been a key element in the design, development and provision of an effective reward package. These considerations will inform, for example, the mix of benefits offered, approaches to performance management and its relationship with pay, and the method and style of reward communications. More segmented approaches which reflect the different stages of the employment/reward life cycle are increasingly being recognised and adopted in order to maximise impact and effectiveness.
Whilst early indications are that pension auto-enrolment may be achieving the goal of getting more employees into workplace pension schemes (although evidence to date is primarily based on the experiences of large employers and only time will tell if this trend will continue as more SMEs pass their staging date), this can only be seen as the “starting point” in terms of ensuring employees are planning properly for their future. Greater pensions flexibility of the type announced by the Chancellor will bring with it increased responsibility, emphasising the importance of making informed choices on when and how accrued savings are utilised. The transition from the world of work to one of retirement is increasingly being undertaken on a graduated and phased basis, again, requiring a different and more flexible approach to managing the resulting financial implications.
All of these factors underline the need for organisations to ensure they have in place reward policies which support and enable longer working (and retired) lives. To (mis)quote the iconic Who song, most employees these days will not “die before they get old”, this clearly is an issue which will not “fade away” and it is, perhaps, one about which employers should cause a “big sensation”!
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