Meet Needs of Older Workers to Avoid Brain Drain
Companies may be subsidizing their own corporate brain drain if they offer generous early retirementplans instead of finding ways to retain their graying senior staffers with flexible work options and benefits.
With the low unemployment rate, "there has been a shift -- now companies try to think of ways to keepolder workers. Instead of trying to ease or entice them out, they are trying to entice them to stay," LindaO'Brien, a PricewaterhouseCoopers director, tells Human Resource Management News.
Will Workforce Support Growth?
Companies need to ask themselves some soul-searching questions, says O'Brien. "They need to look at thegrowth of the company -- what do they see in the future for themselves in the next 5, 10, 15 years? How istheir current workforce going to support that growth? Are they losing or close to losing key employees toretirement? Are they getting the right new hires in the door" to replace them?
They also need to ask themselves if they can afford to pay pensions over long periods that are extended atone end because of early retirement and at the other because of longer life expectancy.
If a company finds it is in danger of losing the knowledge base it has in older workers, it should startlooking for ways to retain them, instead of looking for ways to force them out the door.
Pensions and Paychecks
There's a lot going on now to encourage older people to stay in the workforce. "Social Security is the tipof the iceberg," O'Brien says, referring to the new law that eliminates the Social Security retirementearning test when a person reaches full retirement age. Members of Congress also are introducing bills"that would allow people to tap into their pensions and get still get a paycheck," she says, encouraged bycompany representatives testifying about the need for change.
A number of companies recognize the advantage of retaining, and even recruiting, senior staffers:
- General Electric has found that it is more economical to retrain veteran engineers in new technologies than to hire new ones.
- A substantial portion of the workforce of Walt Disney World in Orlando, Fla., is composed of retirees of other corporations.
- Travelers Group has successfully implemented a retiree job bank for both its retirees and those of other companies.
- Days Inn has found that recruiting older workers has had a positive effect on both sales and service.
And many older "knowledge workers" would prefer to remain employed on a reduced, more flexibleschedule because they enjoy the work and/or because private savings and Social Security will fall short oftheir retirement income goals, O'Brien notes.
As evidence she cites a PricewaterhouseCoopers survey conducted last year. In response to the question:"If your employer offered a plan to transition from full-time employment to part-time employment beforeretiring completely, would you like to take advantage of it?" 82% answered yes.
Retirees as Consultants
A company could allow eligible employees to reduce the number of hours worked. Another alternative,according to O'Brien, is to allow eligible employees to retire and be rehired as consultants. The rehiredconsultants could supplement their income by tapping into their pension.
Older employees also can be retrained for jobs in a different part of company, O'Brien says. "Be sure tohave an environment that an older worker wants to work in. Will they be comfortable? Don't just givethem a desk in the corner somewhere."
The Ralston Purina Co., the St. Louis-based producer of pet products, has taken steps to retain itsolder workers.
"Tool Chest" of Options
According to Sandra J. Donahue, director of retirement plans, "flexible work arrangements provide thecompany with a good 'tool chest' of ideas to use to react to the changing needs of the workforce."
A number of flexible arrangements are offered:
- Some employees hold "regular" part-time jobs.
- Two part-time employees may "split" the hours worked and remain eligible for benefits.
- A new paid-time-off system has replaced the traditional vacation plan.
- The five-day workweek can be compressed into a four-and-a-half-day workweek.
- Each year five days of paid time off can be banked, and every five years 25 consecutive workdays can be taken as a sabbatical.
- Retiring employees are extended consultant opportunities for temporary assignments of a prespecified duration. No benefits or pension accumulation is provided.
- For appropriate positions, a split home/office schedule is available.
Last year Ralston Purina introduced a new pension plan in which domestic employees covered under theold system were given the choice of remaining in the traditional plan or moving to a "Pension Equity"formula. The Pension Equity option allows employees to move toward "unsubsidized" early retirementbenefits. Lump sum distributions are available to those electing the Pension Equity option.
The company made changes to its ESOP-based 401(k) match (the ESOP 10-year loan expired in December1998). Effective January 1999, a major portion of the match was provided through a cash balance "subaccount" within the pension plan. The company has found that participation levels remained steady at 85% to90%.
Donahue says the company's benefit approach is designed to allow greater flexibility in postretirement income stream.
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