The ageing workforce is here to stay. It is a product of demographic change driven by baby booms, people living longer, the changing nature of pension provision and the extension of discrimination laws to encompass age.
Whatever your perspective on the issue, its implications require careful management and the subject will be high on the 2015 boardroom agenda, especially for utilities. In its 2014 Strategic Directions Report, Black & Veatch identifies the ageing workforce as the seventh most important issue facing the water industry in the US. According to this survey, 30-50 per cent of industry employees in the US are due to retire in the next
ten years.
The position is similarly critical on this side of the Atlantic, where the Economist Intelligence Unit has forecast that the ageing workforce will be a top three issue for UK employers across sectors by 2020. The threat posed by this trend is magnified for utility companies by a tendency for employees to be long serving. Therefore the collective loss of expertise and experience from this dynamic will be colossal. Set alongside the increasing complexity of regulatory requirements and technological developments, this is expertise the industry can ill afford to lose.
The law protects employees from discrimination on the grounds of age, but this is really just protection against employer misconceptions and prejudice against older workers. In fact, older workers are generally reported to be more reliable and loyal, as well as carrying valuable experience.
There is no evidence that age significantly affects cognitive function for a fit employee up to their late 70s. While it is true that older workers can suffer from ill health – and if they do they are likely to be absent for longer – this is offset by a lower incidence of absence and accidents. The law against age discrimination is not going to solve the skills shortage but it might play a part in changing attitudes towards older workers.
While employees are free to retire as before, they will be less inclined to do so as the state pension age increases and yields from pension pots decline. There is nothing to stop employers from seizing an opportunity and planning for an ageing workforce by taking a more creative approach to the timing and the concept of retirement.
Indeed, employers should treat their older workforce as any other employee group and invest in training and support irrespective of age. Flexibility is increasingly common in relation to working practices and employees do not forfeit legal rights by adopting flexible working. Legislation governing the taking of pension benefits provides latitude for creativity and employers can flex remuneration and benefits packages to match. Indeed, they will need to do so both in relation to cost and suitability. National Insurance contribution breaks above retirement age are attractive and it may be that tax laws will change in response to demographic change.
Employment laws encourage flexibility by removing barriers to employee requests but employers will need to be proactive and they will need to wean male employees, in particular, off traditional assumptions about working longer hours and receiving more pay. There is no doubt that human resources professionals have a major communications role to play, breaking down stereotypes and advocating the type of workplace environment in which older workers can feel comfortable and are attracted to defer retirement in whole or part.
For some, this will be a challenge. Employers may still be getting to grips with the subtleties of shared parental leave, let alone thinking about drafting a policy for grandparental leave.
If the consequences of age become a factor, then these can be dealt with by performance management in the ordinary way and employers need not fear unwarranted liability.
It is a common concern that employees working on beyond normal retirement will become less productive and a burden. Yet nothing in the age discrimination laws requires employers to tolerate lower standards of performance and the industry will need to view the abolition of mandatory retirement ages as an opportunity rather than a threat if it is to cope with the anticipated loss of experience and skills in the next decade.
There is, however, a need to review occupational health support and to carry out suitable health and safety risk assessments in the context of an ageing workforce.
Utility companies will need to compete for ageing workers in order to deal with skills shortages. This will require a change in recruitment practices, and packages will need to be devised that are attractive to older workers both in terms of benefits and work-life balance.
Traditional methods of recruitment may have to be rethought. Internal labour markets tend to favour younger workers, and payment systems that reward employees by reference to length of service and depth of expertise can operate against older workers – so these methods of recruiting and rewarding will need to be revised.
Sex discrimination has a longer legislative history than age discrimination and there is a long-standing view, based on research, that in certain environments women need to be head and shoulders above male counterparts to succeed. If this is replicated in relation to older workers it could have serious implications for skills shortages. Formal policies of equal opportunity based on age and attention to retention and recruitment in this sector of the workforce become critical. Managing talent and adapting jobs to be suitable for a wider age range are key objectives going forward, as talk of 75 as the new 65 becomes widespread.
There is a potential tension when preparing an age inclusive retention and recruitment plan when government initiatives promote the employment of the unemployed youth in an economy, which remains uncertain whether or not the economy has emerged from recession. Achieving the appropriate balance is going to require subtlety and creativity, but the competitive advantage which is the reward for getting this right is a prize worth winning.
Michael Ryley and Noel Walsh are partners at Weightmans LLP