How to deal with an ageing workforce
This is the second in a series of articles produced for the Future of Work Hub by Lewis Silkin LLP looking at the key implications for business of an ageing workforce.
The age diversity of the UK workforce has shifted dramatically over the past 30 years. Government statistics show that the employment rate for individuals aged 50-64 increased by 14.2% to 69.6% in this period. Over the same timeframe, the employment rate for the 65+ age group doubled to 10.2%.
According to the Resolution Foundation, a third of people born today will live to 100. With people living and staying fitter for longer and with the abolition of the default retirement age in the UK in 2011, which allowed employers to force staff to retire upon reaching 65 years of age, older workers have the option to retire later (and pension changes make continued work a financial necessity for many).
An age diverse workforce can ensure that employers have the full range of skills and experience to enable the business to flourish in an increasingly competitive and global market. Knowledge-sharing, different perspectives and enhanced customer experience are all additional benefits identified in the CIPD’s report on Managing an Age Diverse Workforce. Moreover, because many older workers reportedly retain a greater sense of loyalty, employers can often expect more years of work from someone in their fifties than from someone in their twenties, who may be more likely to seek promotion elsewhere. (This is notwithstanding the reported decline in the proportion of young people moving jobs over recent years.)
There is, however, the potential for conflict where businesses are made up of different groups of people with different outlooks and attitudes. Many organisations are structured around a predictable turnover and, with no compulsory retirement age and fewer opting to retire at the age of 65, this can create employee relations issues. Older workers who choose not to retire could be seen as blocking positions, so preventing younger workers from progressing their careers. This potential for conflict can also arise in situations where younger employees manage older workers, who may believe they have “seen it all before” and be resistant to instruction.
Life expectancies have reportedly been rising by up to three months a year since 1840 and there is no sign of that trend levelling out. With people living longer, more employees will have caring needs to fit in around their working commitments. For younger employees, it will generally be to care for children, while those a bit older will more likely be looking after parents. If a request for time off for childcare reasons can be complied with, a similar request in order to care for elderly relatives should be treated in the same way. See the next article in the series for further discussion on potential discrimination risks arising from dealing with flexible working requests.
A recent Institute for Employment Studies (“IES”) report highlighted that the factors which make work fulfilling for older workers (over 50) are similar to those for younger workers, but there are certain ones that are more important. Older workers are likely to appreciate flexibility, particularly those who may wish to transition into their eventual retirement by reducing their days or hours of work, rather than the traditional “cliff edge” retirement arrangement. Older workers are also likely to value being part of an organisation with values they identify with and work that gives them autonomy and the ability to pass on knowledge to others.
Millennials are also likely to appreciate flexible working opportunities – they may be happy to work hard but less willing to stick to rigid timetables. This cross-generational desire for flexibility will be a key feature of the evolving work environment. Employers who adopt more flexible working practices are likely to improve productivity and reduce absenteeism and stress in the workplace. Again, employers will need to deal with competing requests carefully so as not to fall foul of anti-discrimination legislation.
While longer life expectancy necessitates extended working lives for many people in order to afford retirement, healthy life expectancy is not rising at the same rate. Physical health inevitably declines with age, meaning that employers will bear additional costs - both directly from the cost of providing healthcare benefits and indirectly from lost working days. Employers play an important role in this area: the IES report mentioned above noted that health has the biggest effect on an older worker’s decision to work. According to an Acas report on Managing Older Workers, the available evidence suggests that designing jobs to meet the capabilities and aspirations of older workers tends to decrease turnover and sickness absence while increasing commitment and productivity.
Increasingly, many organisations are implementing mental and physical wellbeing strategies to minimise sickness absences in their workplace. Employers should also be mindful of the obligation to make reasonable adjustments for those with disabilities, again ensuring that this is done in a non-discriminatory manner and consistently for all age groups.
Inevitably performance will deteriorate at some point, but when and why this happens is not predictable or universal and employers should not make generalised age-related decisions about their older workforce. In the past, employers tended not to address performance issues with older workers on the basis that compulsory retirement provided a more “dignified” exit from the workplace. Following the abolition of the default retirement age, this is no longer a viable option for most employers. Where underperformance arises for an older worker, it must be dealt with in the same way as anyone else. Employers should have robust performance management systems and policies that work for all levels of seniority within a business and equip managers with the confidence and ability to challenge senior members of staff who are no longer performing satisfactorily.
Employers will also need to be readier to tackle “difficult” conversations about employees’ future plans, which will often be of critical importance for business-planning purposes. It is crucial to make such conversations a regular feature of line management discussions for all employees. While these discussions may be of particular relevance for older workers who might be considering retirement, employers can glean useful insights about the rest of their workforce’s plans. To avoid potential discrimination claims, it is important to avoid singling out older workers and ensure that any such conversations are broader than relating just to an individual’s “retirement plans”.
As employees live and work longer, 50-year careers will become the norm rather than the exception. In what some have termed the “multi-stage” life, it is likely that many employees may choose to make radical career choices or change direction as they seek new challenges. Skills will therefore need to be frequently updated. In the future, trainees and apprentices may be of any age, rather than such positions being the sole preserve of school leavers.
The Office for National Statistics predicted that while the proportion of the UK population who are of traditional working age (16-64) has remained relatively stable, it will decline in the future. Many employers currently reporting difficulties in replacing lost skills will find that the “skills gap” will become even more challenging. Research by the CIPD on Managing an Age Diverse Workforce has shown that there are three times as many unemployed older workers as there are young people not in education, employment or training and that employers tend to retain and retrain existing employees rather than recruit older workers. The Acas report mentioned above reinforces this, noting that the recruitment of older workers is less common and unemployed older workers still struggle to re-enter work. In the future, employers who recruit from an increasing pool of older workers as part of their workforce planning are likely to benefit not only from being able to manage the skills gap better but also from the specific experience that older workers and an age diverse workforce have to offer.
The impact of the ageing workforce on employers will largely depend on how proactively they are able to support and manage different generations at work. While taking account of age-related differences is necessary and unavoidable, employers should be mindful of making assumptions and adopting stereotypes.
When the default retirement age was abolished, many employers chose to have no retirement age at all, but the Acas report on Managing Older Workers notes how employers’ responses have tended to be reactive and piecemeal rather than embedded into strategic goals. We may see a shift in approach in the future and potentially the return of retirement ages, if employers decide they need additional tools to manage their workforces. These may be objectively justified retirement ages within particular workplaces, or possibly even the re-introduction of a general default retirement age. Given the latter would negatively affect older people, who tend to be the most enfranchised, there would clearly need to be significant advantages in adopting such a potentially politically damaging policy.
The UK’s withdrawal from the EU could also lead to major changes in due course, although the implications for discrimination law are as yet far from clear. Age discrimination itself was only introduced in the UK because of EU legislation. The government’s European Union (Withdrawal) Bill will convert EU law into UK law as it stands on “Brexit day”. Although the UK might theoretically be free to remove this form of discrimination after leaving the EU, this is extremely unlikely. Not only would it be a controversial move - and contrary to government pledges to protect and expand the rights and protections of workers – but also incompatible with other international human rights standards such as the European Convention on Human Rights.
Britain’s most senior judge, Lord Neuberger, has called on the government to provide more clarity about how UK law will be developed after Brexit and how UK judges should treat decisions of the European Court of Justice after the UK leaves the EU. It remains to be seen to what extent the UK courts could row back from the more expansive approach to discrimination law in European case law.
Watch out for the next article in the series will look at harnessing flexibility in the future world of work. To read the introduction to the report which gives an overview of the impact of three megatrends - globalisation, technology and changing demographics - on the world of work, see the introduction to the series.
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