In this article, Joss Anderson, Principal Employee Experience Strategist at Zone, examines the reasons behind the great retirement, and explores how organisations can create a compelling value proposition for older workers to stay or return to the workforce.
Employers are facing huge challenges in attracting and retaining the talent they need; currently, the labour market is suffering from skills shortages in all sectors and high levels of vacancies, with 365,000 more open jobs across the UK than the same period 3 years ago, pre-Covid 19. At the same time, birth rates are continuing to fall, meaning fewer young people are entering the workforce. Older workers are key to filling these gaps, yet employment rates drop markedly after the age of 55. According to the Centre for Ageing Better, 27% of all people of this age group are neither in work nor looking for work.
But this isn’t simply something that affects individual businesses — it impacts society, and the government is worried. There are currently almost a quarter of a million fewer people aged 50–64 in active employment than there were at the start of the pandemic and, simply put, the country can’t afford for so many people to be economically inactive.
The unprecedented cost of Covid-19 measures over the past three years have taken their toll on the economy and, combined with the reduction in younger people entering the workforce, this so-called “silver exodus” is potentially catastrophic for the nation’s finances, contributing to wage inflation and putting pressure on the public purse. And this trend is set to continue as society ages further: the World Health Organisation estimates that by 2030, 1 in 6 people in the world will be aged 60 years or over and in the same year, the first millennials will turn 50, the first gen-Xers will turn 65, and the first baby boomers will start to turn 85.
Older workers who found themselves unemployed during the pandemic are likely to find it much more difficult than other ages to find another job. Employers are significantly less open to hiring older workers than younger talent. According to a recent City A.M. survey, only 30% of managers reported that organisations are open to recruiting people close to state retirement age or older. The UK government is embarking on a mission to reverse this trend, leaning on employers to do more to encourage older workers to stay or return to the workforce.
A recently published government report titled: A New Vision for Older Workers highlights the “3 R’s”, namely: retaining, retraining and recruiting, and the Department for Work and Pensions is providing £22 million of funding and recruiting a network of designated 50PLUS: champions working directly with Job Centres and local employers to help older people find work and review their finances, skills and health to help them better prepare for their retirement and build financial resilience, in what is being called a “mid-life MOT”.
While it might be tempting to assume that most over 50s would happily return to work if the opportunities were there, what about those workers who have made a conscious choice to retire? Will pressure on employers and a mid-life MOT be enough to coax older people back into work? From an employee experience (EX) perspective, the value proposition for older workers to stay or return to the workforce needs to be compelling, and we therefore need to fully understand the reasons why over 50s are really leaving the workforce, and what might influence their decisions.
No financial imperative to work
In 2022, the Office for National Statistics published the findings from its Over 50s Lifestyle Study, in which it highlighted several further reasons why people aged between 50 and 65 are leaving the workforce: 66% of the sample surveyed owned their own home outright and the survey found that age is negatively correlated with debt, so older people may no longer need to derive an income from work.
Furthermore, many in the higher income and savings brackets may be disincentivized to continue working because of pension regulations that limit the amount that an individual can save annually and over their lifetime (currently £40,000 and £1,073,000 respectively) and taxation on pension income. The pension changes announced in this week’s budget will see these limits increase, but this is only likely to benefit the wealthiest savers, as less than just 4% of the UK’s current workforce have or are at risk of reaching the lifetime limit. Critics of the Chancellor’s plans argue that this may even have the reverse effect by encouraging people to retire earlier than they might have done by being able to build up their pension pots quicker.
Shifting priorities
In the same ONS study, 18% of those in the 50–65 age bracket reported that they wanted a change in lifestyle: the pandemic provided an opportunity for many people to re-evaluate their priorities, and for some, this meant trading employment for other activities. While not exclusively limited to older workers, according to research by Legal & General, 9% of over 50s ( around 1.3 million) planned to retire an average of 2 years earlier than they initially planned to as a result of the Covid-19 pandemic.
Caring responsibilities
Older people are more likely to be providing care to others, and many over-50s will find themselves part of the so-called “sandwich generation” —referring to individuals who are looking after both their children and ageing parents at the same time. These dual caring responsibilities can place a huge burden on people and for those whose employers are unsympathetic, it may be a case of family versus job. There’s a gender imbalance here too, with women being more than twice as likely to be caring for more than one person than men.
Disillusionment with work
Over 50s may become disillusioned with work for a variety of reasons. Experience of age discrimination can lead to feelings of exclusion and a lack of opportunities for career progression. There is a marked negative correlation between age and satisfaction with career progression opportunities, with 22% of the oldest workers feeling that their job offers little or nothing in the way of career progression.
Being expected to take on increased responsibilities or work longer hours without receiving adequate recognition or compensation combined with a lack of support and development opportunities can also lead to burnout which — while not limited to this demographic group — may contribute to decisions about early retirement among older workers.
But it’s not all doom and gloom: despite the overall downward trend in over 50’s employment, there is also evidence that a sizeable proportion of older people are choosing to keep working past traditional retirement age in order to continue to contribute to society and find purpose in their own lives; work is a way to achieve both those aims. During the pandemic, nearly 15,000 retired healthcare professionals returned to work in the NHS to help relieve pressure on their former colleagues. And maybe this highlights an opportunity for employers struggling to recruit and retain older workers.
Encouraging older people to stay in work
While businesses may feel the government needs to do more to in terms of loosening pension regulations and financial incentives for older workers who would like to claim their pension and work (and there is an argument for that), unless organisations do more to retain older workers, the government may need to intervene, possibly by further increasing the age at which people become eligible for the state pension, thereby penalising individuals or by taxing companies that don’t do more, thus penalising business.
Employers who are thinking of how to make their employee value proposition as attractive to older workers as to those newly joining the work force are seeking to ensure the EX is relevant. For older workers, this means finding ways to ensure that employees’ needs are met, not only in financial terms, but also in ensuring that older workers feel a sense of belonging, purpose and relevance in the workplace.
- Listening strategy — Encourage older people to talk about their workplace needs by creating a safe and supportive environment where employees feel comfortable sharing their thoughts and concerns. Managers play a key role in creating a workplace culture where employees feel comfortable discussing their needs. Providing training and support for managers can help them understand the needs of older workers and create an environment that fosters open communication.
- Create an inclusive workplace culture — Older workers may feel isolated or marginalised in a workplace that is dominated by younger employees. Creating an inclusive workplace culture that values diversity can help older workers feel valued and respected. Consider age-neutral language and practices: this includes avoiding terms such as “young and dynamic” in job advertisements and avoiding age-related assumptions about work preferences and abilities.
- Rethink traditional work arrangements — Think outside the traditional 5 day, 40 hour week; older workers may prefer flexible work arrangements that allow them to work part-time or from home. Offering flexible work arrangements can help attract or retain older workers who may have caregiving responsibilities or health issues that make traditional work arrangements difficult. As organisational expectations are shifting away from remote working, some older workers may be put off returning to work. Older workers may also be interested in transitioning to retirement gradually. Offering phased retirement options can help retain older workers who are interested in reducing their hours or responsibilities over time.
- Review policies and benefits — Consider your policies and benefits package from the perspective of older people. Is there anything in the way they are described that might exclude older age groups? Older workers may value benefits such as health insurance and the ability to add ageing parents or even grandchildren to health or dental policies, paid time off for carers or time off to support with end-of-life care.
- Create a sense of purpose — Purpose is a key motivator for people of all ages. Recognise the value that older workers bring and provide opportunities for mentorship and knowledge-sharing. Older workers may have valuable knowledge and experience that can benefit the organisation. Providing opportunities for mentorship and knowledge-sharing can help older workers feel valued and engaged, while also benefiting the organisation. Older workers may be looking for opportunities to continue learning and developing new skills. Encourage older workers to talk about their experience, aspirations and goals — don’t assume they won’t be interested in new challenges, promotions or learning new skills simply because of their age. While this may sound obvious, and notwithstanding the fact that age is a protected characteristic from a diversity and inclusion perspective, older workers who feel their employers recognise their knowledge and skills will feel more valued and engaged.
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