Does an ageing workforce mean a change in benefits strategy, or is more general flexibility the key to keeping all ages happy? Maggie Williams finds out

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If your image of an older worker is a wizened cynic who’s seen it all and doesn’t want to learn anything new, who holds the record for greatest number of sick days ever taken in any 12-month period, and who is counting down the days to retirement while keeping younger workers from progressing in their careers, it’s time to think again.

The abolition of the default retirement age in October 2011 preventing employers from forcing employees to retire at the age of 65, has merely added legislative heft to a trend that was already emerging – that of individuals working longer, either through financial necessity or because they want to. Office for National Statistics figures in June 2012 showed that there are now more than 906,000 over-65s at work, the highest figure since records began in 1992 and almost a third of those that qualify for the state pension.

Changes already under way to the state retirement age mean that in future it will be linked to life expectancy figures, and that will mean more employees over the age of 65 across the board. However, while we may be living longer as a nation, that doesn’t mean employees retain the same needs and motivations at the age of 65 as they do at the age of 18. 

Neither, however, does it mean that those over 50 aren’t interested in a company-sponsored iPad. As with any other area of HR, there are inherent risks in stereotyping the types of benefits that older workers are likely to value.  While pensions are typically valued more highly by older workers, and childcare vouchers may be less of a draw, other types of motivational and short-term benefits show as much diversity among older workers as among younger ones.

Reward offerings

“I think it is too early to say whether the abolition of the default retirement age has had an impact on the benefits people are choosing,” says Graham Jarvis of Staffcare.

“There tends to be a move over time from interest in pay increases to more stability,” says Mark Quinn, partner at consultants Mercer.  Quinn also says that the “trusted advice sources” that individuals use to give them support around benefits and career more broadly may also change with age: “are younger people more or less likely to trust friends and family compared to their employer?”

Iain Fox, owner of benefits provider Fidelius, says that the default retirement age hasn’t had much of an impact yet in terms of benefits packages, but “we have seen some employers asking to extend group risk schemes to older workers.  And, inevitably, older workers will see greater value in their pension”.

Jarvis adds: “One would expect to see benefits continuing to be bought by older people as they continue in work, and most notably this would be funding their pension. The more you put in and the longer you leave it to buy an annuity the better the retirement terms will be.”

“As an employer’s age profile changes, the chances of someone dying in service increases”

Chris Rofe, senior partner at Buck Consultants also sees an ageing workforce having the most immediate impact on group risk. “As an employer’s age profile changes, the chances of someone dying in service increases. We are already seeing that come through in the cost of group risk and death-in-service policies and also the need to make amendments to the wording of policies to ensure compliance with the Age Equality Act.” Rofe points out that this applies both at the upper and lower end of the age scale. “Employers are having to extend the age boundary down to 16 from 18, and also increase the upper age from 65.”

Rofe says that ageing workforces are also prompting innovation from group risk providers, with the development of policies that might, for example, pay out a higher lump sum but offer no spouse’s pension. Another approach being investigated by providers is offering a fixed term payment of three to five years, rather than an open-ended payment.  However, Rofe says that to date, take up of new products has been relatively small: “Insurers are reacting through innovation, but we’re not seeing a response to it yet. Companies need to be made aware of the innovations that are out there now.”

While group risk policies might be seeing the most immediate impact from greater inclusion of older employees in the workplace, private medical insurance and other types of healthcare benefit are also likely to be affected in the medium term. “There is an increasing group of staff that need help maintaining chronic conditions,” says Rofe.

“While the type, design and mix of benefits on offer may change over a longer period of time, the reality of the removal of the default retirement age is here and now”

He suggests that employers may, in future, consider offering a major medical plan to older workers who “may have personal savings for minor conditions, but might be interested in medical insurance that gives them access to major medical costs”, albeit with a higher excess. Sickness absence management programmes and occupational health are also considerations – an employee with a chronic condition may still be engaged and motivated by their work, but may need a different approach to their absence management from other parts of the workforce.

Aside from medical and group risk provision, other forms of benefit are less likely to be affected, at least in the short term. However, in the longer term, the types of benefits offered through flexible benefits systems may also change, believes Rofe. “We are seeing different things come into flex, such as home computing initiatives and even discounted access to will-writing services,” he says.

David Pearson, director of cinema voucher provider Filmology also sees the need for a broader range of flexible benefits: “Experiential benefits and rewards can appeal to an older age group, particularly as they may not be as attracted by material things as younger workers. Sharing time with family and friends may be a greater priority, so benefits which create memories are growing in popularity.”

’Some typical staff retention benefits may have less appeal for this age group,” agrees James Malia, head of P&MM Employee Benefits.  “Salary and pension will be vital, but that doesn’t guarantee commitment.” Malia says that of the salary sacrifice schemes currently available, holiday purchase schemes are one of the most popular with older workers, enabling workers to purchase more annual leave.

While the type, design and mix of benefits on offer may change over a longer period of time, the reality of the removal of the default retirement age is here and now.

Getting the balance right

“For some employers that has proved a challenge because they’ve had a long-standing culture of not managing older workers on the basis that they can retire them at 65,” says Chris Brooks, policy adviser for employment and skills at Age UK. “The challenge has been to introduce age-neutral systems and ensure that older workers are being given the same opportunities as everyone else.”

Brooks also points out that ensuring an HR department has the people skills to deal with older workers is important: “It’s one thing having a policy on paper, it’s another carrying it out.”

“The best workforces are those where there is diversity”

Adoption of flexible working patterns across all age ranges is one approach that can offer particular benefits. Although at present the right to request flexible working is restricted to parents, legislation is in the pipeline to extend this to all employees, which Jo Swinson MP, the recently appointed Parliamentary under-secretary for employment relations and consumer affairs, replacing Norman Lamb, says will happen “within this Parliament”.

“The best workforces are those where there is diversity,” says Swinson, speaking at an Age UK forum on flexible working. “While there’s an understandable focus on youth unemployment and it’s important that this is dealt with, there are also considerations to be made for older workers. Getting rid of the default retirement age is a positive sign from the government that it must judge workers on ability, not on their date of birth. However, we need to improve the way in which flexible working is implemented.”

A combination of greater support for flexible working – which could also extend to more accommodating attitudes to home working – combined with a wider range of flexible benefits are two key factors that can help with supporting older workers. Crucially, a benefits strategy that works is a benefits strategy that works for all of an organisation’s employees.