Why it’s time for businesses to start thinking differently about older staff
The Fourth Industrial Revolution, changing world of work and rising longevity suggest that it’s time to rethink career planning. Nashalin Portrag, Head of FundsAtWork at Momentum Corporate, says that this also means that it may be time for businesses to reconsider their employee value proposition and notion of retirement.
Globally people are starting to retire later. *While the most general retirement age for state-provided retirement systems in EU Member States tends to be 65 years, countries like Spain, Germany and France are planning to raise their retirement age to 67 years, while the target is 68 years in Britain and Ireland.
The results of a global study by Mercer, Healthy, Wealthy and Work-Wise: The New Imperatives for Financial Security, proposes that the traditional view of retirement should be relooked. The study, which covered 7 000 adults and 600 senior leaders across 12 countries, found that 68% of people globally don’t ever expect to retire or expect to keep working past their traditional retirement age, while 86% say that continuing to develop professionally and personally is important**.
Closer to home, Portrag says that an analysis of FundsAtWork Umbrella Fund members shows that while the average retirement age as determined by members’ employers is 64, income replacement ratios paint a concerning picture of the kind of retirement members retiring at this age can expect. While ratios vary across industries, the average income replacement ratio across all FundsAtWork members suggests many South Africans are not saving enough to retire at their stipulated retirement dates.
According to Portrag, it may be time for businesses to start thinking differently about retirement and what older employees, nearing retirement, can offer the company. Many employees may want to keep working past the traditional age of retirement.
Portrag continues, “Stipulating a retirement age and requiring employees to retire at that age made sense in the old era of defined benefit retirement funds. With these funds, one’s employer guaranteed a defined pension benefit based on years of service. However, in the current era, where defined contribution is the dominant funding model and life expectancy is rising, how appropriate is it to stick to a pre-determined retirement age?
The new generations entering into the workforce also expect greater flexibility when it comes to employee benefits and the employee value proposition. Some may have additional work they do in addition to their primary jobs and in order to retire comfortably and replace different sources of income, it is important they start saving early towards retirement, preserving when they change jobs as well as consider higher contributions or additional voluntary contributions when they can.
In the changing world of work, careers have started to look different. Careers have shifted to include the skills and experiences gathered over time, in various organisations, roles and contexts. Employee contribution is now exchanged for experiences that align to individual values and create meaning.
The concept of late career change has emerged, referring to a career where the individual is typically older than 50 years or has been working for 30 years or more. At this stage, the focus is no longer on mastering skills, but more about doing work that provides meaning and fulfillment. It often occurs independent of organisational context and structure, and is associated with high levels of career satisfaction and engagement with work. This stage may or may not include formal retirement.”
Portrag points out that reframing retirement and tapping into the contribution of late career stage workers benefits both employer and employee.
Individuals who work beyond their retirement date, whether on a permanent or contractual basis, are able to defer retirement and optimise the growth of their retirement savings to increase their retirement replacement ratios. Plus, they have the opportunity to unlock personal and professional growth and fulfilment in the late stages of their career. Employers, on the other hand, benefit from retaining the talent, skills and experience of older employees, possibly on a more flexible basis.”
Portrag concludes, “Changing the way we think about work and retirement allows us to rewire our career approach and unlocks a host of new opportunities, for both employee and employer.”