One of the latest benefits workplaces are offering is actually one that’s been around for some time in various forms. The benefit is called, phased retirement plans. Both private sector and public sector have used phased retirement plans but usually have called it “consulting.” The colloquial term has been called “double dipping.” In other words, a person retires and receives their retirement benefits but immediately comes back to work either in the same job or something similar and usually receives just pay not benefits. The difference with what’s happening now is that these types of retirements are occurring more often and in different formats which has brought about the term, phased retirements.
So what’s driving this approach to retirement? According to FiveThirtyEight.com, baby boomers are starting to reconsider retirement and it could become a crisis. The Great Recession greatly reduced retirement accounts and caused many to delay retiring until recently. The number of people claiming to be retired has risen 10% since 2010. In addition, there has been a 20% drop of baby boomers in the workforce since 2003, and, of course, it will continue to drop as baby boomers decide to retire. This is a large group so the impact will be big!
Workplaces are beginning to realize the loss that will prevail once all the experience and knowledge has left. One workplace identified they would lose 27,000 years of knowledge and expertise with pending retirements. The biggest problem most employers face with retirements is they can’t identify just exactly what the knowledge or expertise is at risk until it’s gone.
In the Harvard Business Review article, they cite Boeing as a perfect example. When they decided to build the Dreamliner, it was the first redesign in over 60 years so they knew it would take a lot of knowledge and experience to help produce the new aircraft but what they were most concerned about was the loss of knowledge and experience of future retirees that would impede the planning and building of the new aircraft.
So how are work organizations handling this huge problem? Some of the labor-management committees we have worked with have addressed this issue by looking at education. One committee encouraged the workforce to upgrade their skills through education so employees would be ready for retirements. The committee provided an education fair by inviting schools and other entities, including the union’s educational department, to come and introduce themselves to the workers. In addition to giving information to workers about schools, it also provided workers an opportunity to ask their questions and to learn about financial assistance with education.
Another labor-management committee addressed the problem with succession planning. This would give the employer some time to plan for the retirements that would be occurring and to transfer knowledge and expertise from the employee leaving to the employee staying. It also would allow workers to plan their future by obtaining more skills if they were to replace a retiree.
One of CALMC’s colleagues, the Ohio Employee Ownership Center at Kent State University here in Ohio has done a lot of work with succession planning to prepare business owners for retirement, especially as they consider employee ownership as an option. Family businesses sometimes have no one to continue the business but may have an employee that is interested in owning or operating the business. It also may be a family owned business just needs assistance passing the organization on to another family member. One industry they worked with was agriculture. Agriculture saw huge needs for succession planning as farmers were getting ready to retire.
In June, 2016, a blog posted on the Society of Human Resource Management(SHRM), said even though phased retirement is a recognized benefit in only a few workplaces according to a recent survey, it is being used more often unofficially and a report on CNBC said large employers were the ones more inclined to provide phased-in retirement plans.
AARP (American Association of Retired Persons) has been looking at phased retirements with SHRM and says there is no cookie-cutter approach to a phased retirement plan. They offer examples organizations have done. Some employees are working fewer hours, job-sharing, contracting, or working as a temp when needed. These jobs, of course, could be pre or post retirement options.
AARP says phased retirements offer benefits to both employers and employees and encourages employers to develop a plan.
For employers, phased retirements can help with operational needs. As mentioned above, it helps with the loss of skills and experience. It also can help with labor or skills shortages or with turnover issues. Personnel costs are also reduced when retirees expertise is utilized. Other advantages to phased retirements includes an increase in productivity as workers can have both a work life and a personal life. And, finally, it can allow employers some time to do some personnel planning and review future needs.
Phased retirements can offer a number of benefits to employees depending on the type of phased retirement plan is used. One of the biggest advantages for workers looking to retire is the psychological benefit. Phased retirements give workers a window of what retirement will be like. It also helps future retirees plan their retirement. Reduced work hours for future retirees may be a real perk for those who worked regular work hours for years. Additional income, possible benefits and sharing expertise or learning newer skills are other benefits for workers.
Existing employees that are not planning on retiring also benefit. They can work beside a future retiree to learn more from their experience. This can help with continuity for the operation and reduce the opportunity for a knowledge gap that can occur with traditional plans. It also reduces the pressure placed on existing employees having to learn quickly or within a specified time.
AARP also suggests employers need to determine if phased retirement plans are good for the organization. It is absolutely essential for there to be buy-in throughout the organization from the top to the person on the floor. This can be an excellent issue for an employee engagement process or for a labor-management committee to work on.
It is also important to understand IRS is just now beginning to address guidelines for phased retirements. It also may not be financially beneficial for all workers to take part in phased retirement plans. These are issues that must be included when planning phased retirements.
Another important issue to mention is not all employers like the idea of retaining retirement approaching employees. Some prefer to pressure employees to retire. Some are concerned about their defined benefit plans being adequately funded. Some think older workers are too expensive to employ and don’t want them to stay on.
There are a number of things to consider and it definitely should be addressed either in labor-management committees or other employee engagement processes where there are more perspectives to address the concerns and needs of both employer and employee.