By Liese Hutchison
Approximately 11,000 baby boomers are turning 50 years old every day. Retirement is just on the horizon for millions of American workers. A golden time for retirees, but a potential labor shortage for employers. With a booming economy and a shrinking workforce, employers are turning to phased retirement as one way to save the intellectual capital of the company, offset the recruiting and training costs of new employees and address labor shortages.
Watson Wyatt Worldwide, a management consulting firm operating in 36 countries, conducted a survey to determine how many companies were implementing phased retirement options. With 60 percent of the survey respondents saying they are having a difficult time attracting workers, most agree that a phased retirement program, along with job sharing and telecommuting, is a viable strategy for addressing labor shortages.
Tom Lawrence, a Watson Wyatt consultant, says phased retirement programs offer flexibility to the employee and provide transition time for the employer to train new workers. “In a robust economy, employers face more competition for critical skill employees. At the same time, 76 million baby boomers are aging, and we have a shrinking supply of younger workers. Employers are turning to phased retirement programs to help win today’s war for talent,” he notes.
Phased retirement programs are most common among employers in the education sector (36 percent), public administration (21 percent), health care (18 percent), wholesale/retail (12 percent), manufacturing (11 percent), finance/insurance (11 percent) and utilities (7 percent). Employers with workers who average in age from 45 to 49 years old are almost twice as likely to offer phased retirement than are businesses where the average age is under 45.
Lawrence remarks that what surprised him about the survey results are the number of companies that don’t know the age breakdown of their employees. “A trend we’re seeing from that result is that organizations are wanting to know the demographics of their workforce,” he notes. “But more importantly, organizations want to know what we can do to help them maintain competencies, skill sets and intellectual capital, while assisting the individual’s needs.” Lawrence says those facing retirement still want to feel needed, know they are making a contribution and get gratification from the work they are doing.
Arrangements for phased retirement programs vary among organizations:
- 75 percent hire retirees as part-time workers or temps
- 60 percent reduce the retirees’ work days and work weeks to between 20 and 30 hours
- 42 percent hire retirees as consultants
- 32 percent use a job transfer strategy
- 23 percent grant extended leaves of absence
- 19 percent employ job sharing methods
- 18 percent hire retirees for seasonal work
- 8 percent offer alternative career paths.
- Sixteen percent of companies surveyed offer phased retirement programs
- Phased retirement is far more prevalent at firms where the average age of the workforce is 45 or older
- Almost half (49 percent) of companies with phased retirement programs say retaining key talent is the primary reason
- Seventy percent believe that programs like phased retirement may be a solution to the labor shortage brought on by the combination of demographic forces and a boom economy
- Offering retirees part-time or temporary work and shortening the work week or the work day are the two most common ways to implement phased retirement
- Many companies offer fewer benefits to phased retirees and/or reduce the value of benefits during phased retirement
- Two-thirds of the companies support eliminating IRS restrictions on paying pensions to active employees as a way to facilitate the introduction of phased retirement programs.
Liese L. Hutchison is an assistant professor in the department of communication at Saint Louis University and a free-lance writer.
