Getting retirement right

david.lain
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The recent announcement that the coalition government is to phase out the default retirement age of 65 was met with apprehension by some employers. Concerns were expressed that by abolishing fixed retirement ages we are loosing a dignified way of retiring staff whose performance may be in decline. In addition, employers feared that unproductive employees would cling on to their jobs.

This parallels debates in the US when mandatory retirement ages were effectively outlawed in the mid 1980s. However, the US experience, and wider research, suggests that if HR professionals are doing their jobs effectively organisations have little to fear and perhaps something to gain from the change in the law.

There is little academic evidence that unproductive staff cling to their jobs in large numbers in the US. Although employment rates past 65 are higher in the US, the majority of employees leave employment by this age. Those that remain in work are disproportionately higher educated and healthier (indeed, US legislation has failed to get the poorest working precisely because it is hard for them to compete in the labour market). There is also reason to believe that those remaining in employment are often the most committed, as US and UK survey-based studies show that work commitment is often highest amongst oldest workers.

The concern that a fixed retirement age offers a dignified exit from employment slightly misses the point in my view. Abolishing the default retirement age will not abolish retirement as a dignified route out of employment. However, allowing employers to use fixed retirement ages has arguably encouraged managers to cease developing and progressing workers prematurely in the UK. This, in itself, is a source of indignity for older employees and potentially has motivational and productivity costs for the organisation.

There will be some significant consequences for HR professionals and their organisations, however. Until 2006 there was no age discrimination legislation, and employers could terminate an individual’s employment almost at will after 65. Research by Sarah Vickerstaff from this period suggests line managers typically decided who could continue working beyond normal retirement age, often on a rather arbitrary and inconsistent basis. The law changed in 2006, allowing employees the right to request continued employment past 65. However, recent research by Matthew Flynn, in which 70 employers were interviewed in depth, suggests little has changed. Line managers have retained a huge degree of discretion over deciding when people can continue working and few employers have consistent policies or procedures in this regard.

Clearly arbitrary treatment of older workers cannot continue following the legislative changes. Employers wishing to dismiss an individual over 65 will have to use the same procedures as they do for younger employees, based on capability, conduct, illegality or some other substantial reason. This means that effective systems of performance management are advisable, so that decisions about continued employment are seen to be fair and legally defensible.  This will have costs and many employers are wary of having to monitor the performance of older workers. However, if conducted constructively, enhanced performance management systems can have beneficial consequences. There is a wealth of UK research that suggests older workers disengage and leave employment early if they feel they are not being supported and invested in

Of course the changes will have consequences for line managers, who need to be made aware of the legal ramifications. However, the legal side, although extremely important, is perhaps rather secondary to the need for people skills in managing the transition of employees into retirement. Relatively few age discrimination cases are brought in the US; on the other hand the vast majority of people retire and for some individuals this will be a difficult process. There may well be cases where a manger has to deal with an employee who does not recognise that from a work perspective it might be a good idea to retire; dealing with situations such as this will require a great degree of sensitivity and tact. This is clearly an area where line managers could do with some training.

Finally, employers who want to retain the expertise of older employees need to recognise that the legal changes will only take them so far. Older people often have many claims on their time, whether it be caring for grandchildren or an aged parent, voluntary work, or simply the desire for more leisure. Research reviewed for the EU Workcare Synergies Project consistently highlights the possibilities for encouraging gradual retirement. This means enabling people to reduce their hours of employment in the lead up to ‘full’ retirement; policies such as allowing more flexible working arrangements and allowing people to take their pension whilst working may encourage this.

HR professionals may benefit from a wider understanding of the factors influencing work and retirement in older age, and are able to get in touch with the author about a free seminar series called Rethinking Retirement organised by the Universities of Brighton, Kent and Edinburgh.

David Lain is a Research Officer at the University of Brighton Business School

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