Extending Working Lives by Cate O'Malley

A DIRECTOR’S GUIDE

EXTENDING WORKING LIVES How businesses can benefit from the skills of an ageing workforce

Supported by the Department for Work and Pensions

A DIRECTOR’S GUIDE

EXTENDING WORKING LIVES How businesses can benefit from the skills of an ageing workforce

Group editor

Richard Cree

Associate editor

Sarah Hanson

Sub editor

Robert Sly

Designer

Martin Lee

Production manager

Lisa Robertson

Chief operating officer

Andrew Main Wilson

Director general

Miles Templeman

Published for the Institute of Directors and the Department for Work and Pensions (DWP) by Director Publications Ltd, 116 Pall Mall, London SW1Y 5ED 020 7766 8950, www.iod.com

The Institute of Directors, the Department for Work and Pensions and Director Publications Ltd accept no responsibility for the views expressed by contributors to this publication. Readers should consult their advisers before acting on any issue raised.

Printed in Great Britain

ABOUT THE SPONSOR

The Department for Work and Pensions (DWP) The Department for Work and Pensions provides opportunities for millions of people. It helps people find jobs, helps children out of poverty, supports those out of work, provides security in retirement, strives to advance the rights of disabled people and to improve health and safety in the workplace.

Age Positive Age Positive is a Department for Work and Pensions initiative that highlights the business benefits of recruiting and retaining older workers. The workforce is ageing and by 2020 almost a third will be over the age of 50. By 2026 half of all adults in the UK will be over 50. The aim of Age Positive is to provide employers with the tools and knowledge they need to prepare for demographic change and to capitalise on the skills and experience of older workers. It does this by sharing best practice examples of age-neutral practices, such as replacing fixed retirement ages with more flexible approaches to work and retirement, and highlighting the business benefits. Age Positive has produced a range of publications, based on information gathered from employers on their policies, practices and attitudes on these issues. It continues to work with businesses and trade organisations to develop further guidance and sector-specific information for employers.

CONTENTS Introduction The age challenge for employers Miles Templeman, director general, Institute of Directors Foreword A wealth of experience Angela Eagle MP Minister for pensions and the ageing society

1 Setting the scene Malcolm Small, senior pensions policy adviser, Institute of Directors

2 The needs of a modern workforce Alison Coleman, freelance business journalist

3 Bringing down the age barrier Peter Bartram, freelance business journalist

4 The future of retirement Peter Bartram

5 How to manage older workers Claire Coleman, freelance journalist

6 Balancing work and home Claire Oldfield, freelance journalist

7 Finding the right insurance Edmund Tirbutt, freelance journalist

8 The cost of longer working lives Debbie Lovewell, deputy editor, Employee Benefits magazine

9 Health and safety is for everyone Sarah Hanson, associate editor, Director Publications

10 Staying within the law Vanessa Hogan, senior associate, employment practice, Lovells LLP

11 Looking ahead Malcolm Small

Resources

INTRODUCTION

THE AGE CHALLENGE FOR EMPLOYERS Miles Templeman Director general, Institute of Directors When the smoke clears from this recession and most of the short-term economic issues have been dealt with, one cloud will remain on what will be an otherwise bright future. That cloud is demographics. The impact on modern economies of a rapidly ageing population is hard to over-emphasise. And while this is not a new phenomenon, the speed with which it is changing the British working landscape is astounding. With every new breakthrough in medical science, potential life expectancy grows. In other respects, too—notably pension provision—the figures are truly frightening. When the state pension was introduced, average life expectancy was 66. Now it’s 77 and yet many of us have stuck to the same expectations over work, pension saving and retirement. This is not sustainable. While employers face an ageing customer base, they also recognise that their workforce is getting older. Sharper employers that have made their organisations more appealing to older workers are reaping the benefits, with improved customer satisfaction and a healthier workplace culture. Governments also have a role to play—not in setting targets or seeking to penalise or wrap employers in red tape, but in providing a legislative and

INTRODUCTION

economic environment that makes it easier for them to do what’s right for their business and society at large. A potential crisis in our pension system is avoidable only if we take concerted action to rethink the model. Faced with a similar problem, Australia acted quickly and thanks to a compulsory savings scheme has overtaken the UK in terms of average savings. Whether that’s the right approach for here is still in question, but what’s not in doubt is that allowing employees to stay on beyond an arbitrary maximum age, whether it’s 65 or 70, is essential. Who can’t point to a family member or friend who is over 70 and yet in perfectly good health and well able to contribute to economic prosperity? There are complex issues that remain unresolved around the balance of different age groups in the workplace, health and safety at work and, crucially, the interplay between pension savings and extended working lives. This guide will help directors understand what the questions are and, hopefully, allow them to frame possible solutions.

Company is open book on age

promotional feature

Leading UK book retailer discovers benefits of employing people at both ends of age spectrum

he experience of book retailer Borders UK Ltd supports the statistical evidence that employing mature candidates reduces absenteeism and staff turnover. nover nover.

And just to prove that young employees can be equally loyal and hardworking, it recruits from the age of 16. “I find other staff frequently consult me because of my life experience and education,” says 57 year-old Eileen. “As someone who only did her degree and MA in my 40s and early 50s I feel my career has only just begun.” At the other end of the scale, 17 year-old Mark says: “Working at Borders since I was 16 has helped me incredibly; it has given me great experience and broadened my knowledge. From doing my work experience here over a year ago, I found nothing but support from the managers.”

The company view “Our workforce is made up of people from mixed age ranges, all of whom are committed to both the company and their jobs,” says Anna Lloyd, head of HR. “As well as being mindful of the cost of absenteeism and high labour turnover, nover, we’re also conscious that the UK has an ageing nover population, so we’re taking the opportunity to review our benefits package so it is attractive to people of all ages. If we mirror our customer base, we will obviously be more successful.”

Chapter and verse Some of the main steps taken by Borders UK Ltd to broaden the age range of their workforce: • Removed retirement age

• Switched pension provider so that employer contributions reflect eflect an employee’ employee’s • Removed age and qualifications position rather than their age • Invited all age groups to apply for vacancies from application forms

For more information visit www.businesslink.gov.uk/agepositive

Our workforce is made up of people from mixed age ranges, all of whom are committed to both the company and their jobs. Anna Lloyd, head of HR, Borders UK Ltd

FOREWORD

AWEALTH OF EXPERIENCE Angela Eagle MP Minister for pensions and the ageing society The demographic changes that are happening in society have created exciting opportunities but also a challenging situation. The workforce is ageing and, by 2020, almost a third of employees will be over the age of 50. By 2026, half of all adults in the UK will be over 50. We must remember that with age comes experience; harnessing the skills and talents of older people within the workplace is essential. Older employees can act as mentors for younger people when they start work. The long-term aim of the government’s Age Positive initiative is to provide employers with the tools and knowledge to prepare for the fact that our workforce is ageing and to use the skills and experiences of older workers. I hope this guide will give employers a practical steer towards making these objectives a reality.

Talented team drives company forward

promotional feature

How one employer is using the skills and experience of older workers to narrow the skills gap

kill and capability are the benchmarks for employment at Co-op Retail Logistics (CRL),

and the company recognises that its older people have a wealth of experience and talent. The company, which operates without a fixed retirement age, benefits by retaining the skills and experience of people like Duncan McKellar. Joining CRL as a driver in 1994, Duncan is now 66 and works in the traffic distribution office as a traffic clerk

There are significant

When Duncan reached the age of 65 he chose not to

business benefits. By

retire as he wanted to keep working.

disregarding age, we

Amanda Jones, Head of Diversity at Co-operative Group

maximise opportunities for

says; “Through actions such as the removal of our

people to fulfil their own

retirement age and training our managers, we have worked to ensure that our employees are judged on ability

potential and continue to

alone and no other factor. We believe it simply doesn’t

contribute to the success

make sense to retire an employee because of their age.”

of the business.

There are significant business benefits too, says Angela

Angela Burns, Regional HR Officer, Co-op Retail Logistics

Burns, Regional HR Officer; “By disregarding age, we maximise opportunities for people to fulfil their own potential and continue to contribute to the success of the business.” For more information visit

www.businesslink.gov.uk/agepositive

CHAPTER 1

SETTING THE SCENE Living longer means spending more time at work. What are the challenges for business and how can employees save for a decent retirement? Malcolm Small, the IoD’s senior pensions policy adviser, explains In 1944, Lord Beveridge confirmed the retirement age for men as 65, yet average male life expectancy at the time was just over 66. And for many workers in manual occupations, the figure was much lower. But a man reaching 65 today can hope to live for a further 22 years. Moreover, he is likely to lead a more active, healthier life than might have been predicted in the past. According to the Office for National Statistics (ONS), the number of people of state pension age or above, as a percentage of the working age population, has been steady at around 30 per cent since the mid-1970s. But this is projected to increase as those born during the baby booms reach state pension age against a backdrop of low fertility. Taking into account the rises in the number of people of state pension age that will occur between 2010 and 2046 as a result of government legislation the figure is expected to climb to 34 per cent by 2051. And there is no sign of the improvement in longevity abating, even taking into account factors that some commentators suggest may hold it back, such as the growing obesity problem. ONS projections suggest the number of centenarians in England and Wales will reach almost 65,000 by mid-2032. Some go even further than this. The Methuselah Foundation is working on therapies to combat or reverse the ageing process and envisages a time where healthy lives beyond a biological age of 200 will be commonplace.

SETTING THE SCENE

Even if this seems far-fetched, the impact of medical advances on ageing is clearly evident. For example, the average life expectancy for male smokers, who today can expect to live until 73, is rising by five months each year. This is almost entirely due to widespread statin treatment for coronary artery disease. And radical progress in survival rates for previously fatal cancers has also had a significant effect.

How accurate are these predictions? No one can be certain. An unforeseen pandemic could affect their accuracy. The arrival of Spanish flu in 1918 certainly lowered average life expectancy sharply. And this could happen again, with many millions across the planet dying. We just don’t know. But barring such phenomena, a slowdown in mortality rates looks set to continue. Some commentators have

“Living longer is surely a good thing, and there are many ways in which people and governments can rise to the challenge”

suggested that the “dependency ratio”—the measure of people of working age to those above state pension age—would become unsustainable at nearing two-toone. Although there are changes planned, there would certainly be

pressure upon state and private pension systems if nothing altered in policy or social terms. It is unrealistic to expect to fund a 30-year retirement from, effectively, a 35-year working life, and we’d better get used to it. But living longer, healthier lives is surely a good thing, and there are many ways in which people and governments can rise to the challenge of changing demographics. What can be seen as a problem could become an opportunity for millions of people.

SETTING THE SCENE

Longer, healthier lives The overall picture is one of optimism. Compared with the past, people are living longer, healthier lives and there are more resources to sustain them in retirement than a century ago. But there are crucial issues for both businesses and employees. They include: ■ The decline of workplace pension provision, and of defined-benefit schemes in particular. Employees seem to value a good pension less, and the high costs of these schemes mean that either a defined-contribution plan is offered, or none at all. The Association of Chartered Certified Accountants says 90 per cent of SMEs, with up to 250 employees, do not offer a pension. ■ The inadequacy of retirement saving. The Department for Work and Pensions (DWP) estimates that around seven million people are not saving enough to deliver the pension income they are likely to want, or expect, in retirement; an estimated 44 per cent of working age employees are currently not contributing to a private pension. This is worrying. ■ The relatively low level of the state pension, adding to the inadequacy of private saving. According to the DWP’s Pensioners’ Incomes Series the average benefit and state pension income for single pensioners is just £151 a week. This is intended to be a foundation supplemented by private saving.

Rising to the challenges So how are people and policymakers here and overseas tackling the problem? The Australian solution… In Australia, retirement saving into an approved superannuation scheme—or a “Super”—has been compulsory for employers, and optional for employees,

SETTING THE SCENE

since 1994. Employers are compelled to pay in nine per cent of earnings, with employee contributions on top of this. Following a successful matching scheme a couple of years ago, where amounts workers paid in were equalled dollar for dollar by the government (up to a certain level), average aggregated contribution rates are now 16 per cent of salary. Australia has overtaken the UK in

“Australia recognised the looming retirement savings problem early. They seem to be tackling the issue of under-saving well”

terms of the average per capita size of pension pot. The Australians recognised the looming retirement savings problem early, and from a much lower base of overall provision. They seem to be tackling the issue of under-saving well.

… and the UK response From 2012, employers will be required to automatically enrol all eligible staff into a qualifying workplace pension arrangement. A new low-cost pension scheme, currently referred to as the “personal account scheme” will be introduced as one such qualifying arrangement. Total contribution levels will be around eight per cent of the worker’s qualifying earnings (currently between £5,035 and £33,540 a year in 2006-07 terms). For the first time, all workers will have access to a pension-savings vehicle, although they will be able to opt out, unlike in Australia. As a result of reforms in the UK, around three-quarters of women reaching state pension age next year are expected to be entitled to a full basic state pension, compared to around half before the reforms. In the future the state pension will increase in line with growth in average earnings, so that pensioners will be better off in the long term. And to reflect rising life expectancies, state pension age for both men and women will increase by one year in every decade from the 2020s, to reach 68 by 2046.

SETTING THE SCENE

This starts to tackle under-saving. Incentives to delay retirement have been introduced for those able to defer taking the state pension, with the possibility of a cash sum or enhanced pension as a result. ONS says 11.6 per cent of people above state pension age are still working, and this figure is rising rapidly.

Over 65 and willing to work We will see larger numbers of older workers and entrepreneurs for several reasons. Retirees are often in excellent health and active, with much to contribute professionally and socially. Nowadays, 65-year-olds don’t want to retire altogether and the idea of the “cliff edge”, where employees stop work one day and fall into retirement the next, is seen as increasingly anachronistic. For those with high-grade professional skills, this can be turned to opportunity, in consulting or other work. Even for those in more manual jobs, chances to teach craft skills can emerge for those willing and able enough to take them. If employers ensure that any

“Any loss in speed and agility among older workers is often compensated by an increase in their accuracy and reliability”

physical requirements of a job are specified during recruitment and interviewing, older applicants will be aware of what is needed and their suitability. Businesses may introduce testing, but this should be for everyone, regardless of their

age. Poor workplace design and inflexible working practices prevent staff from being fully effective, not age. Overall, the health and fitness of older people is improving. Any loss in speed and agility is often compensated by an increase in accuracy and reliability. Older employees do not have more accidents than younger workers. And their rate of short-term absence is lower. Age should not be a sign of

SETTING THE SCENE

capability and does not determine an employee’s physical ability to do a job. As the number of younger employees shrinks with the declining birth rate, the skills and loyalty of older workers are likely to be in more demand, although a change in the attitude of some employers and sectors will be needed.

Other ways to fund retirement Many older people have built up substantial residential housing equity, or may own their property outright. This equity can be converted into capital or income through a range of schemes, with a variety of new products emerging in recent years. This can make a substantial difference to the size of retirement incomes. Inheritances are also coming through to this generation, and there are other sources of long-term saving, such as the Individual Savings Account. ISAs have attracted more than £300bn since being launched 10 years ago and are clearly being used as retirement savings vehicles, given their flexibility and the tax-free nature of the income they provide. It must be remembered that between 2010 and 2020 the state pension age will be equalised and the age for Pension Credit raised to 65 for men and women. The state pension age will climb to 66 from 2024–2026, to 67 from 2034–2036, and to 68 from 2044-2046. In conclusion, we can envisage with optimism a future where retirees, as we currently understand them, carry on working and saving for a full retirement, which will begin at a more advanced age than now and prove more active.

CHAPTER 2

THE NEEDS OF A MODERN WORKFORCE Companies will reap rewards for making the workplace more attractive to older employees. But how do you recruit and retain experienced staff? Alison Coleman reports Employers are being urged to consider the impact of an ageing working population on their organisations with good reason. Given that almost half of UK adults will be over 50 by 2026, firms will become more reliant on older workers. Those that have planned for changes in the age profile can expect minimal disruptions as the over-60s and over-65s continue working past traditional retirement age. But companies that have not taken action could risk severe labour and skill shortages as mature employees either retire or look to continue their working life elsewhere. While recession has reduced the demand for labour, a dearth of skills will hinder recovery and restrict long-term growth. And the problem will worsen if employers insist on ditching talented, experienced staff who have reached a fixed retirement age. Businesses that have found ways of attracting and retaining older workers stand to gain the most. For some time, B&Q,Tesco, Barclays and BT have reaped the benefits of employing older workers. These employees reflect the similarly ageing customer base of the companies; possess a wealth of life skills and experience; and demonstrate a work ethic that results in reduced sickness absence.

THE NEEDS OF A MODERN WORKFORCE

How do you appeal to older workers? What changes do organisations need to make to create an attractive workplace? Do they need to invest in new facilities and devise fresh strategies, or can existing practices be adapted to suit an older working population? In the first instance, says Dianah Worman, diversity adviser at the Chartered Institute of Personnel and Development (CIPD), mature staff need to be perceived as individuals rather than an age group. “There is a tendency to view older workers as a homogeneous group, but like people of any age, they are motivated by different things,” she says. “If you can tailor individually what you are offering, whether it is facilities, benefits or working patterns, all well and good, but the most important thing is to make sure that what you offer is fair and provides choice for all staff.”

Flexible working Employers can offer flexibility across the board without incurring huge costs in time and money. The rise in popularity of variable hours, including part-time working and flexitime, has been driven to an extent by legislation that recently extended the right to request flexible working to all parents and many carers. Opportunities to work outside fixed hours are welcomed by many older employees, and forward-thinking employers with their future workforce in mind are going beyond their legal obligations and offering the option to all staff. Peter Thompson, director of management consultancy WiseWork, says: “Flexible working is particularly attractive for professional people who have a wealth of valuable experience but no longer want to be in high-pressure, full-time, senior management positions.”

THE NEEDS OF A MODERN WORKFORCE

Plugging the skills gap At Newham College of Further Education in east London, just over a quarter (26 per cent) of the 600-strong workforce are over 50. Those in specialist roles, such as lecturers, have key skills that are vital to its ongoing success.

Last year, the college achieved a 100 per cent success rate in terms of people choosing to continue working after the age of 65, driven in part by the chance to take part in a mentoring programme.

Senior HR manager Olivia Besley says: “We run a mentoring and coaching course that staff can attend either through self-referral or nomination by another member of staff.

“People will retire eventually, and a programme like this gives them a chance to share knowledge with less experienced people. This gives everyone a sense of being valued, which makes them feel more productive and enables the college to carry out effective succession planning to ensure that there are no skills gaps.”

The employee benefits offered also reflect an age-diverse workforce. These include healthcare and lifestyle perks, a generous annual leave allowance and a final-salary pension scheme.

The opportunity to work fewer or less regular hours allows them to wind down gradually to full retirement. Beyond that they are often keen to stay in touch with the organisation and offer services on a part-time or consultancy basis. “Employers who have not grasped the concept of flexible working are more likely to lose these individuals. They then have the challenge of trying to attract equally experienced people to replace them,” says Thompson. The ability to offer flexible work patterns depends on the nature of the business. Manufacturing firms are generally tied to strict operating deadlines, while many

THE NEEDS OF A MODERN WORKFORCE

retail and service sector companies are focused on dealing with customers directly. But there is usually scope for making adjustments to rigid patterns. The approach of estate agent Hunters to flexible working and older employees has had a huge impact and helped it to expand. Its methods of attracting and retaining staff include job sharing, part-time working and flexible retirement. Ultimately, says Thompson, employers need to see the bigger picture. “There is a strong connection between flexible working and increased productivity. Organisations that are looking at long-term growth can’t afford not to consider flexible working as part of their strategy.”

Employee benefits Employee benefits can be another effective recruitment and retention tool, but only if they are worthwhile. So what makes an attractive perks package? Communicating with staff to establish preferences is crucial, says Andrew Woolnough, director of benefits management at Jelf Employee Benefits. “The important thing for employers to recognise is that people go through career life cycles—their needs and interests change.Through effective communication, they will learn what motivates employees at various stages.” Benefits that save people money are popular across the ages, including those offered through a salary-sacrifice scheme. Employees give up the right to part of their salary in return for an employer’s agreement to provide them with a noncash benefit. The salary is sacrificed before tax and National Insurance is calculated, resulting in a discount on the product or benefit. Typically, these include pensions, bikes and childcare, but more recently salary sacrifice has been extended to cars. The introduction of a 10 per cent banding for benefit-in-kind tax, followed by reform of vehicle excise duty, has made a car

THE NEEDS OF A MODERN WORKFORCE

Older and still valued In the smallest firms every staff member is a key worker, and the skills and experience of all employees are valuable.

Leeds-based waste management company T Shea, which employs 15 people aged between 16 and 68, demonstrates its commitment to retaining its mature employees by operating without a fixed retirement age.

Administration manager Sue Passelow says: “We value our older workers and are not in any hurry to dispose of them after retirement age. They are valued, trusted members of our close-knit team. We find they can advise younger members in terms of their work ethic, their attitude towards their superiors, and help to train them in the operating of machinery and plant.”

T Shea shows its value in older staff by using a flexible approach to employment, both in terms of the roles employees choose and the hours that they work.

“We do not have to ‘bribe’ our workers with incentives to retain them, but we do offer a flexible attitude to their individual needs,” Passelow adds.

cash allowance via salary sacrifice attractive for older staff. Other suitable perks include skills training and financial education. But in trying to lure older workers with benefits, employers must be careful not to alienate or discriminate against younger staff. Woolnough says: “The key lies in offering choice. The easiest way of doing that is through a flex-benefits system, from which staff can choose from a menu of options, including pensions, retail vouchers and healthcare.”

Learning from the past Part of the business rationale for keeping older workers is the need to retain the knowledge that they hold to benefit future generations. It is clear that long-

THE NEEDS OF A MODERN WORKFORCE

serving employees are just as eager to share skills and leave a legacy of their work. The onus is on the employer to allow them to do so. Knowledge-sharing ranges from “buddy” schemes in which long-serving staff are partnered with younger, less experienced employees, allowing them to pass on expertise through their day-to-day work, to formal mentoring programmes with structured training. A joint study carried out in 2008 by the CIPD and HR consultancy Penna, entitled Gen Up, suggests that the sharing of skills could go further. The report identified four key generational groups in the workforce—veterans, baby boomers, Generation X and Generation Y, each with varying degrees of knowledge, experience and qualifications. Tracy Whybrow, a partner at employee involvement specialists Involve, says: “In order to maximise the skills and qualifications of each age group within an organisation, there has to be knowledge-sharing in all directions.” In large businesses, this can be done through formal programmes run by outsourced specialists, and in small firms via informal staff discussions over lunch, harnessing the best that each age group offers. The presence of older workers can have a positive impact on workplace harmony, too. Their strong work ethic, excellent customer relationship skills, combined with a grasp of the fabric of the company—its history, culture and strategy—will rub off on younger colleagues. “Today’s organisations may be very different to what they were 30 or 40 years ago, but employers recognise that there is value in sharing old practices and learning from the past, and older workers are key to that process,” Whybrow explains.

THE NEEDS OF A MODERN WORKFORCE

How businesses will benefit To meet the needs of a modern workforce, employers must provide an environment that resonates with different age groups. In the short term, developing the reward strategies, work patterns, training and knowledgesharing processes to attract mature workers will create challenges, but the benefits—including a stronger skills base, engaged and productive employees, and sustainable growth—will be long term.

Top tips for employers ■ Assess the age profile of your workforce and the impact that future changes to this may have on the organisation. ■ Employee surveys can provide an accurate and valuable insight to the views of all age groups in the workforce. This will help to identify what engages people at various stages of their working life and allow employers to provide the most appropriate benefits and working strategies. ■ Flexible working should go beyond basic legal requirements. But you must communicate with staff to establish the popularity of this perk and to stress that changes to working practices must be based on a clear business case. ■ Provide opportunities for mentoring and coaching. These could include formal sessions co-ordinated by outsourced trainers, as well as informal group discussions and “buddying” schemes, pairing older and younger workers in an ongoing arrangement. ■ Keeping skills up to date will help to prevent knowledge gaps appearing, so ensure that training and career development opportunities do not exclude older members of staff.

CHAPTER 3

BRINGING DOWN THE AGE BARRIER From a giant pubs chain to a regional bus company… Peter Bartram talks to enlightened employers that have scrapped the fixed retirement age and are benefiting from the skills and experience of older staff Emily Bullers, 89, is proof that you’re never too old to do a useful day’s work. She worked for Lloyds Bank in Nottingham. Then her bank became a pub— today Lloyds No. 1 Bar—and, even though Emily was old enough to retire, she switched careers. Now she works in the pub kitchen and is the oldest of J D Wetherspoon’s 21,000 employees. Emily is still in gainful employment because the pubs chain is one of a growing number of companies that has scrapped its fixed retirement age. Mandy Ferries, head of personnel and training at J D Wetherspoon, has no doubts about the value of older employees. They bring in broad experience and old-fashioned values of customer service. In the past year, the number of over-50s in J D Wetherspoon’s workforce has risen by around 20 per cent. First Hampshire and Dorset, which runs bus services around the two counties, hasn’t formally ditched its fixed retirement age but allows pensioners to keep on working. It judges each case on its merits, with operational need being a key factor, says Charley Collard, HR business partner at the company. The firm employs 23 people over 65, including engineers and bus drivers, among its 800 staff. The oldest will shortly celebrate his 76th birthday. “Allowing people to work on after normal retirement age enables us to maintain investment in their training and deliver against operational need,” says Collard.

BRINGING DOWN THE AGE BARRIER

You can’t buy experience Red IT is a nine-person computer services company run by Ara Martirossian. His business, based near Brighton, is at the leading edge of IT, but when it comes to hiring he’s not afraid to choose an employee with a few grey hairs. A 65-year-old marketing manager was hired recently. “The fact he was at retirement age wasn’t something I was worried about. In fact, it was something to be positive about because, in this industry, you can’t buy experience,” says Martirossian. Linda Alker, a lecturer at Manchester Metropolitan University Business School, has surveyed the attitudes of 180 SMEs to older staff. She finds that in many of them the idea of having a fixed retirement age is vanishing. “A lot of the companies I’ve spoken to are fairly flexible about employing older workers,” she says. “They’re keen to keep them because of their attitudes to work. They found they’re committed and likely to turn up reliably for work.”

Carry on working Helen Barnes, a principal research fellow at the Institute for Employment Studies, warns that age discrimination legislation has encouraged some firms that had never had a fixed retirement age to pick 65 as the default option. She believes scrapping a fixed age sends a signal to staff that they’re welcome to carry on working. There is a powerful case for allowing people to stay in employment through their sixties, into their seventies and even their eighties. In his 2005 report, A New

Pension Settlement for the Twenty-First Century, Lord Turner estimated that abolishing fixed retirement could add around half a billion pounds in output to

BRINGING DOWN THE AGE BARRIER

the UK economy. Michelle Mitchell,

“It’s economic nonsense to cast aside the vast experience of people over 65, particularly when we are faced with a skills gap”

charity director at Age Concern, says the figure could be even higher. “It’s economic nonsense to cast aside the vast experience and enthusiasm of people over 65, particularly when we are faced with a growing skills gap. Many

businesses employing staff across all ages cite benefits such as reduced staff turnover and lower absenteeism and improved motivation and commitment.” She believes there is a strong moral case for companies to allow employees to continue working beyond fixed retirement age. “For many people who have been victims of pension changes, who don’t have a decent pension, or need to continue earning money after 65 for whatever reason, the right to work free from discrimination is not an optional extra—it’s something they need.”

17 or 70… the job’s yours There are no legal obstacles to scrapping the fixed age, says Catherine Richmond, employment partner at law firm Nabarro. “The company won’t have any extra legal duties than the ones it owes to its other employees,” she says. “It might think that it will have to provide more support to an older employee as he will be more frail, but that is the sort of stereotypical assumption about older people that age discrimination regulations are intended to bring to an end.” But firms that want to reap benefits from scrapping a fixed retirement age need to go about it effectively. When J D Wetherspoon abandoned the upper limit, it revised job specifications and rewrote its interviewing skills course. “We wanted to make sure our job descriptions were age-neutral,” says Ferries.

BRINGING DOWN THE AGE BARRIER

“Many of our jobs can be done by people whether they’re 17 or 70.” The company told pub managers to avoid discriminating against older applicants when hiring staff. “We made it clear that even though older applicants might not have bar experience, they could still have much to offer,” adds Ferries. “We wanted managers doing the interviewing to consider how older applicants’ experience could be translated into something of value.”

Putting customers first Ferries says that J D Wetherspoon has benefited greatly from boosting the proportion of older workers on its staff. “We’ve found we’ve been able to cover some key shifts that are not so attractive to younger workers, such as busy weekday lunchtimes. We’ve re-educated our managers to be more flexible in their hiring and that’s helped our staff retention.” Older staff are a hit when it comes to customer service. The company encourages bar staff to learn the names of 100 regular customers, chat to them and encourage them to regard the pub as their local. That

“Older staff like talking to people and are willing to spend time making sure that customers are having a good experience”

includes having a regular’s drink ready as he or she walks in. “Older people are good at doing that,” says Ferries. “They like talking to people and are willing to spend that bit more time making sure customers are having a good experience.” J D Wetherspoon has attracted older staff by running a publicity campaign to make it clear that there are no barriers to them getting on in the company.

BRINGING DOWN THE AGE BARRIER

Saving cash on recruitment Collard at First Hampshire and Dorset is also a great believer in the notion that older people deliver excellent customer service. She explains that a lot of their passengers have a bus pass, so it can be reassuring to see a more mature person behind the wheel. “Older customers like them,” she says. Quite a few of the firm’s over-65s want to work on a casual basis. “When this happens we move them on to a zero-hours contract, so they can choose when they want to work,” adds Collard. It costs £2,500 to train a bus driver, so when an older employee decides to stay on, it removes the costs of recruiting and training a new worker.

Forget the gold watch At Red IT, Martirossian is sold on the benefits of older workers. He says that staff often deal with senior managers in client companies, so having a track record goes down well. “We are selling the concept that we have consultants who know what the customer’s problem is, and can sort it out. Experience is definitely a benefit when building credibility with finance directors.” Martirossian adds that older employees have a positive approach to work. “The nature of our business is that we don’t work nine to five. We could be working late at night or over the weekend and more experienced staff members are likely to have an old-fashioned approach to customer service.” Companies that see an employee’s 65th birthday as gold-watch time need to think again. As Age Concern’s Mitchell puts it: “Older people have a wealth of experience and skills to contribute to the workplace and don’t want to be forced to give up employment just because of the date on their birth certificate.”

CHAPTER 4

THE FUTURE OF RETIREMENT Reaching 65 but not yet ready for a life of leisure? From coaching to consultancy, Peter Bartram looks at the options for those who want to keep a foothold in the world of work Company director Jim Harrison, 76, has no intention of retiring. “When I go, I’ll be carried out in my box,” he says. Harrison is active as a non-executive director of two companies and a partner in a 2,000-acre agricultural estate on the Sussex-Surrey border. He is typical of a new older generation that continues to be committed and competent, and is redefining the concept of “retirement”. For many, retirement is still a “cliff edge” from which they leap on their 65th birthday. But increasing longevity, not to mention financial pressures exacerbated by the credit crunch, means that many will have to consider working longer to supplement their income. But there are those, such as Harrison, who don’t want to give up work. Staff at the 15-person Landmark Systems, which specialises in IT solutions for farmers, regard Harrison as a valuable sounding board for their plans. “I’m mainly used by executive directors who like to bounce ideas off me,” he says. “What we really need in business is people with flair. I’m able to use my experience to identify them and sort the wheat from the chaff.” It’s a skill that has proved important at the other company where Harrison is a non-exec —Bookham Harrison, which makes Sussex Charmer cheese. He helped to find the head salesman.

THE FUTURE OF RETIREMENT

Stepping back from the cliff edge Although directors are often in a stronger position than other employees to determine whether they carry on working after normal retirement age, others are not always so lucky. For many, that cliff edge still awaits. “Although a growing number of employers are positive about the benefits of an age-diverse workforce and encourage flexible retirement to support retention strategies, this concept has yet to be adopted by many other businesses,” says Michelle Mitchell, charity director of Age Concern. “Employers play a critical role in providing pre-retirement support for older workers. Early guidance is needed—not just in the six months before retirement. Offering a planned step-down approach maximises benefits to both employers and the older worker as part of a

“For some, retirement is an absolute contrast to what they have done at work —a time to do something completely different”

continuing process, rather than a single intervention.” Yet planning for retirement is not a one-size-fits-all decision, either for individuals or businesses. “It is difficult to be prescriptive about it,” says Helen Barnes, a principal

research fellow at the Institute for Employment Studies.“I think it is for people to define for themselves because priorities are different. For some, retirement is an absolute contrast to what they have done in their working life. Maybe someone worked in a job they didn’t particularly enjoy and they see retirement as a time to do something completely different. “For others, work is very much the meaning of their life and they are more likely to seek some kind of continuity, whether it is doing part-time work in the same

THE FUTURE OF RETIREMENT

10 ways to keep older workers engaged 1. Start early. Don’t wait until the week before your employee is retiring. Begin discussions about post-retirement plans two or three years before. 2. Build a career path. People who continue to work need a plan following retirement as much as they did before. Be flexible when helping them. 3. Explain options offered by their pension scheme. Help them get a handle on increasingly complex pension and tax regulations. 4. Value their experience. Make people feel they have something to contribute even after normal retirement age. 5. Offer flexible hours and include part-time and occasional working. Think about consultancy or other relationships. 6. Look at sabbaticals. Post-retirement employees may want to work, but also take a few months off first to fulfil a personal ambition. 7. Involve spouses in planning. Support from a partner is vital in a productive working relationship following retirement. 8. Weigh up working conditions. Think about equipment that might be needed for people whose eyesight or hearing, for example, is not as sharp as it was. 9. Encourage good health. Consider providing exercise breaks and advice on fitness and health for all employees. 10. Keep in touch. Even when an employee wants to retire, stay in contact through newsletters and the internet. They may want to work part-time later.

field or mentoring. It’s clear that staying active is important, particularly as most people, if they have a partner, are likely to be bereaved at some point in their retirement. And more and more people live on their own, so it is important that people think about creating and maintaining social networks.”

Keeping your identity Nic Sale, head of diversity at business psychologists Pearn Kandola, reckons that many people acquire a strong sense of self-identity from their job. “In

THE FUTURE OF RETIREMENT

essence, they benefit from knowing how they contribute to an organisation or society as a whole,” she says. “Retirement can challenge that sense of identity if people suddenly stop going to work. We also know that working helps them to maintain positive mental wellbeing as they feel they are contributing in a productive and helpful way to society.” Sale suggests that the key to success is making sure there are effective transition periods that support older employees as they wind down. “That also helps to ensure skills gaps are not suddenly created in organisations.” Such changeover periods can include flexible working, sabbaticals, job sharing and seasonal or specific contracts. “Activities that can be particularly effective are those that involve mentoring or supporting the development of junior employees,” Sale says.

Building for a thriving future Richard Cass, a partner in the 20-employee Cass Associates, a landscape architecture and planning consultancy, believes in preparing for retirement well in advance. He is 63 and recently decided to scale back his working week to four days. “It’s a struggle sometimes, but it’s working quite well,” he says. Cass’s working life has focused on environmental issues and he doesn’t want to quit now that they’re coming into the mainstream of planning. “I’m keen to build on the work we’ve been doing rather than see it run into the sand. “Although I’m not preoccupied—and never have been—simply by the moneymaking task, we have built a very successful business here, based on my approach and how we design things, and it would be good to see that thrive into the future. I don’t want to hang up my boots and take to the garden or sail around the world, enjoyable as those things are.”

THE FUTURE OF RETIREMENT

10 ways to work after retirement 1. Become a non-exec. Consider a post in your employer’s company or in another where your experience is relevant. 2. Start your own business. Run it full-time to make significant sums or parttime as a sideline. Use the internet to promote it cheaply. 3. Take up consultancy. Market your lifetime’s experience at a daily rate. 4. Act as a mentor or coach. Work directly with your former company, firms that you know, or through a professional coaching provider. 5. Offer training. Base a course on your best-practice experience and market it through an industry association or commercial training provider. 6. Do committee work. Sit round the table at an industry association, chamber of commerce or other business or professional organisation. 7. Become a voluntary adviser. Organisations such as the Citizens Advice Bureau welcome offers from people with specialist knowledge, especially in finance. 8. Volunteer in a charity shop. Turn up at one in your High Street and state the regular hours you could work. 9. Stand for the council. Contribute to your community—and be paid for it. Most councillors receive allowances and expenses that can supplement a pension. 10. Just keep working competently.

Yet part of the planning involves handing decision-making on to the younger generation. “I tell my colleagues that as long as I am doing something useful and enjoying it, I am happy to stay around,” says Cass. “But I have made it clear that the future of the firm is in their hands rather than mine.” Part of the transition has meant that Cass has stepped down as the firm’s senior partner. He is now equal with another equity-sharing partner in the business. He’s still working out what form his contribution to the company will take when he passes his 65th birthday. “But at the moment, I can’t see me just walking out of the door and forgetting about the whole thing.”

THE FUTURE OF RETIREMENT

Cass is taking on part-time work in

“Many individuals have yet to recognise the value of a planned approach to retirement and the complexity of decisions”

the run-up to retirement. He is serving a four-year stint on the board of the Commission for Architecture and the Built Environment, which will take him up to 67. His role includes advising on sustainable planning and

development for the 2012 London Olympics. He is also involved in Heritage Works, a trust that preserves historical buildings.

Drawing on the knowledge bank Many businesses are recognising that the whole concept of retirement is changing. One factor helping to alter perceptions is that when older employees leave, experience and knowledge walk out of the door with them. Keeping older staff engaged is often a means of handing over the knowledge. “Perhaps somebody has led a particular stream of work for a long time and they might be willing to work with others to look at methods of institutionalising that knowledge, so that it doesn’t go with them,” notes Barnes at the IES. Any company planning to adopt a flexible approach to retirement should acknowledge that it may need to help employees understand the nature of decisions they are taking. “Many individuals have yet to recognise the value of a planned approach to retirement and the complexity of the decisions they might be faced with regarding their individual needs,” says Age Concern’s Mitchell. “Areas that have been helpful in our work with employers and older workers include developing new skills, changing jobs, running your own business, managing your finances, understanding pensions and caring for others.”

CHAPTER 5

HOW TO MANAGE OLDER WORKERS Employers must be open-minded to get the best results from more mature staff, says Claire Coleman. It calls for strong managers willing to change workplace attitudes and offer new career paths The shape of the UK workforce is changing as people live longer and medical science improves. But what does this mean for companies in practical terms? Russell Hobby is an associate director at Hay Group, a management consultancy that advises businesses on motivation and organisational structure. He says one of the biggest cultural changes that must be addressed is the direction of the traditional career path. “We’re so used to finishing our career at its peak,” he explains. “It’s normal to stop working when you’re at the point where your income, authority and status is at its highest point. But if we’re serious about making an ageing workforce work effectively, that idea needs to change.” He believes a new career model should be much more fluid and perhaps involve employees taking on fewer responsibilities and being prepared for a salary cut. “This is a difficult process to manage,” he concedes. “The working culture needs to make it clear that older employees are valued but their skills must also be used in a way that is both appropriate for the company and for them. At 70, do you want to be roaming the country on sales calls? If you do, and you’re as able to do it as you were 30 years ago, fine. But if you don’t, there must be other ways in which employers can capitalise on the experience that you have.”

HOW TO MANAGE OLDER WORKERS

Hobby has a point. For a cross-generational workforce to function effectively, employers must recognise that just because workers are regarded as equal, it does not mean that a one-size-fits-all approach to how they’re employed is needed. Employees across age groups will have varying levels of stamina, a variety of commitments outside the office and different sets of skills. And while all roles should be allocated on the ability to do the job, what Hobby is suggesting demands that employers have a degree of flexibility that enables them to match the abilities of staff with the needs of the company. Similarly, when employers are designing benefits packages, these need to be tailored to the individual to make them appealing. While there may be preconceptions around what older workers want, it makes sense to ask an individual rather than simply assume. “You can’t say that once you hit 60, you have to work a four-day week, because while that might suit some people, it won’t suit everybody,” says Hobby. “You must look at people’s motives for working—is it

“You must look at people’s motives for working—is it purely financial, because they enjoy it, or because they want company?”

purely financial, because they enjoy it, or because they want company?”

The main attraction The benefits package is something that it’s worth getting right. Research by Friends Provident suggested that older employees are more likely to turn down a job due to a poor benefits package (26 per cent) as opposed to those under 40 (21 per cent). More than a third of workers (36 per cent) would be likely to stay at work beyond the state pension age by being offered attractive perks.

HOW TO MANAGE OLDER WORKERS

Carry on working… and draw a pension What businesses need to know about changes in tax and National Insurance rules that allow people to be employed while being paid a pension.

Income from any work, the state pension, or other pensions and investments all counts as taxable income. But from the age of 65, personal allowances are more generous, giving people a chance to earn more before having to pay tax. If an employee is aged between 65 and 74, they’re entitled to a personal allowance of £9,490 and, if over 75, the limit is £9,640.

But if their income exceeds £22,900, the age-related allowance is reduced by half of the amount—£1 for every £2—over that limit, until the basic rate allowance (£6,475) is reached. For example, a 66-year-old with an income of £23,400— £500 over the combined income limit—would have their age-related personal allowance reduced by £250 to £9,240. These amounts are specifically for the tax year 2009-2010.

The employer, through the PAYE tax code system, normally deducts tax payable on the state pension. But tax due on private or company pensions may need to be paid after filling in a self-assessment return. Once state pension age is reached employees do not have to pay National Insurance contributions if they continue working although employers still have to pay their share. Those employees who choose to defer their state pension have the option of getting a higher weekly pension for life at a later date, or taking a taxable lump sum payable when they take their state pension.

While it may sound labour intensive, addressing individual needs is not only something that a good HR department or line manager should be doing, but a strategy that could benefit the entire company. “Employers are quite secretive about benefits packages,” says Hobby. “But being more open could alleviate any resentment that can divide a workforce.”

HOW TO MANAGE OLDER WORKERS

What he’s proposing is an environment where people at different stages in their lives can help each other. Parents of younger children may want a role that takes school holidays into account, while older employees wishing to work flexible hours can cover for younger colleagues during holidays in return for working a shorter week during term time.

Blending youth and experience Once appropriate roles and benefits have been established, and older staff have been retained or recruited, employers are faced with what some might see as a problem: younger managers having to lead an older, experienced workforce. It’s a potentially tricky dynamic but one that can work smoothly. Laurie South is chief executive of PRIME, a charity that assists older workers to start their own businesses. He believes that it’s about good management. “In some workplaces, you already have this situation and see younger managers working with an older team, so it can be done. It’s a question of adapting your approach, recognising that the people you’re working with have something valuable to offer and ensuring that you capitalise on that.” But Hobby warns: “There’s a limit to how collaborative management can be. It’s a two-way street, but management needs to be leading.”

What to do when it’s not working out One of the biggest issues that managers face when their company has abolished the fixed retirement age is how to tackle the emotive problem of addressing at what point an employee is no longer able to carry on working. “There needs to be a structure in place that makes it obvious that whatever decisions are made, it’s a fair procedure,” says Hobby. “Management needs to be honest and effective. After all, if you’re telling someone they need to leave,

HOW TO MANAGE OLDER WORKERS

Talent across the ages Charlie Mullins, founder of Pimlico Plumbers, employs several staff members who are over 65, including van cleaner Buster, 102. He describes their value:

“For us it started after we encountered a lot of problems with young plumbers who just didn’t have the work ethic that we were looking for. We started looking for more mature employees and that spread throughout the business. Not only do I find that our older employees bring a huge amount of experience with them, but they’re happier, more reliable and actually want to be working. That’s the attitude I want in my employees and something that I hope that the younger generation will learn from the older ones.

“By having a spread of ages, you get a breadth of knowledge and having different generations working alongside each other keeps everyone on their toes. The older staff are eager to show they’ve still got every right to be there, while the younger ones need to make sure they’re on top of their game.

“If you’re telling someone who’s been in the business for decades that they’ve got something wrong, you need to be absolutely sure that you know what you’re talking about. Overall, it means our customers get a better service.”

the reasons have to be open and defensible.” The same procedure applies if a younger employee is not performing adequately. He suggests that one step is to have well written job descriptions. “If you can assess what skills, behaviours and competencies are required for the role, you have the framework to assess what success in that position looks like. If an employee isn’t making a success out of that role, the management has to work out why that’s not the case, and might look at reshaping the role. If that’s not possible then that’s the point at which dismissal should be discussed.”

HOW TO MANAGE OLDER WORKERS

Customers prefer a mixed workforce Fiona Robson, who lectures in human resources management at Newcastle Business School, reckons a diverse workforce can improve the bottom line. “Research has shown that customers are attracted to giving business to organisations with a diverse workforce, particularly when the composition is representative of the customer base. While a lack of available younger workers may initially force companies to consider employing older people, it’s a move that, if managed correctly, can pay financial dividends.

Merits of senior service Leon Foster-Hill is diversity adviser at B&Q, the DIY chain that prides itself on a reputation for hiring older staff. It scrapped a company retirement age more than 15 years ago and is a member of the Employers Forum on Age, a network promoting age-balanced workforces. Here, he outlines the store’s approach:

“Faced with a reduced labour pool in the late 1980s we needed a fresh approach to recruitment. In 1989, we decided to test the value of an older workforce by fully staffing a store in Macclesfield with employees over the age of 50. Productivity increased, sales rose and absenteeism fell. Since then we have continued to promote age diversity and today a quarter of our employees are over 50.

“Over 60 per cent of our employees work flexibly or part-time. We also think that training is important. There are a lot of myths around older people and training —some people think that with a lifetime of skills, they don’t require training while others think they need more training than their younger colleagues.

“Neither of these is wholly true and we have developed a comprehensive programme, which, irrespective of age, recognises the skills new employees possess when they join and strives to develop them.”

CHAPTER 6

BALANCING WORK AND HOME A competitive business climate means companies need to offer goods and services round the clock. Time to recruit older employees, who embrace the idea of a flexible working week. Claire Oldfield reports A job is no longer all about working from 9am to 5pm, five days a week, with 20 days’ annual leave. Employers are expected to deliver products and services 24 hours a day, seven days a week, and employees want to balance their work time with a home life. Flexible working is popular because firms recognise the benefits to staff and the prospects for their business. New legislation that allows the right to request flexible work has also been a factor. The idea is attractive to older workers and employers are increasingly looking to recruit and retain them. There are several reasons why this makes sound business sense. Dianah Worman, diversity adviser at the Chartered Institute of Personnel and Development, says that older people are knowledgeable. “They tend to love their job and are good with clients,” she explains. There is a growing recognition that the skills of older workers are highly prized; that they are often better at dealing with customers; and that they often hold values that set them head and shoulders above younger co-workers. Employees aged over 55 have a greater life expectancy compared with previous generations. But this puts financial pressure on them to work for longer. And as the population grows older there will be fewer people of traditional working age, so retaining more mature staff will be crucial.

BALANCING WORK AND HOME

As the priorities of older workers change, flexible working offers more appeal. Where once they might have wanted to fit a working life around their children, they may now aim to tailor it around caring duties. Or they may wish to take flexible retirement and work beyond the age of 65. Some may even try to spend winters overseas and resume working in finer weather. Supermarket chain Asda has designed several flexible-working practices to attract older staff. These include the option to take extended periods of unpaid holiday. “Benidorm leave”, for example, allows employees to take time off over winter, perhaps to spend a few months in warmer climes. It also hires what’s known as the “seasonal squad”, which works for the 10 busiest weeks of the year around Christmas, Easter and the summer holidays.

You can’t afford to lose older workers Increasingly, companies large and small are adopting flexible retirement. Employees nearing pension age can reduce their hours, easing themselves into retirement and enhancing pension rights while the employer keeps their skills. Worman says: “Many older workers want to keep working for as long as they can and to do it flexibly. They do this by taking flexible retirement and not because they want special concessions.” Research from Plantronics, the maker of communications headsets, revealed that though flexible working is thought of as appealing to younger people— drawn to the prospect of greater freedom in the workplace—this is not the case. It was Generation Y, aged from 16 to 25, which said that it was less likely to ask for flexible hours during the recession. By contrast, the over-55s said that they would be more inclined to request flexible working. Worman says that as soon as the UK recovers from the downturn there will be

BALANCING WORK AND HOME

Flexible retirement How the UK’s largest building society and a retail giant appeal to older workers.

Nationwide In 2001, the building society became one of the first employers to introduce flexible retirement. It allowed employees to work until the age of 70, raising this to 75 four years later. Darren Palmer, senior manager employee relations, says: “We found that employees wanted to stay working past the usual retirement age for various financial or lifestyle reasons.”

Employees can choose to retire between 50 and 75, and the option to continue working is available to everyone. Nationwide is committed to age diversity and flexible retirement is a key part of its approach. “We recognise that people are living longer and have different needs at different times in their life,” says Palmer.

“Our approach benefits the organisation as a whole. We’ve found that older employees help increase the levels of satisfaction among our customers.”

Marks & Spencer A key part of the retailer’s business approach is to reflect its diverse customer base within the company. That is why managers offered flexible retirement before age discrimination laws were passed in 2006.

M&S allows staff to draw all or part of their pension while they are still working. It was considered a good way to keep valued employees. “Irrespective of age, we employ highly motivated, customer-focused staff,” says a spokeswoman.

Employees are more productive when they can achieve a balance between work time and other aspects of their lives, the store says. Flexible working was put in place to retain key skills, and at the heart of this was a drive to keep older staff.

BALANCING WORK AND HOME

pressure on companies to work even more effectively. “It is about accessing skills your business needs. It is about managing the talent pipeline and managing it in a smarter way,” she explains. Since it is older workers who have the knowledge and experience to hand down to the next generation, Worman asks: “Can you really afford to lose them?”

What hours do you want to work? Tour firm City Sightseeing Glasgow offers flexible working to all workers including older employees. The company operates bus tours 362 days a year between 8am and 6pm while tourist guide services are provided round the clock. There is a strong seasonal element to demand for the double-decker trips and the business employs 20 people in winter and an extra 50 staff during the summer months. Managers recognised that summer-

“It’s about accessing skills your business needs. It’s about managing the talent pipeline, and managing it in a smarter way”

only working suited many employees, especially older workers, who may take holidays in winter. At the same time, it was clear that the over-55s were less interested in working full-time.

The firm asks employees twice a year how many hours they want to work in the coming seasons. Answers vary from two to six days a week and some offer to share jobs. The benefits are clear: absenteeism is low and retention rates reach 95 per cent. Many older workers carry on working after normal retirement age. Other companies echo City Sightseeing’s positive experience with older workers. Kuljit Kaur, head of business development at employee incentives

BALANCING WORK AND HOME

10 ways to work flexibly Flexible working can take many forms from a part-time job and compressed hours to different shift patterns and a shorter lunch break. Here’s a list of some of the popular options used by companies.

1. Part-time working 2. Job sharing 3. Flexitime, which allows employees to choose, within limits, when to begin and end work. 4. Compressed hours—this doesn’t always involve a cut in hours. The idea is that work time is reallocated into fewer and longer blocks of time. 5. Annual hours, where the period employees must work is defined over the whole year. 6. Working from home 7. Mobile working and teleworking 8. Flexible retirement, which enables workers to draw all or part of their pension and continue working for a company. 9. Benidorm leave—for workers who want to spend the winter in warmer climes. 10. Seasonal employment is aimed at employees who work for the 10 busiest weeks of the year around Christmas, Easter and the summer holidays.

business P&MM, notes that older staff tend to have different values from the younger generation. The firm believes that meeting people’s workplace needs leads to better performance. “If you give them the ability to work four days a week you will have motivated individuals and get more out of them,” says Kaur.

Loyalty brings rewards Other benefits of flexible working don’t hit the bottom line directly. Surveys suggest that older workers are loyal, which means staff turnover is lower; they perform better in appraisals; and their sickness levels can be no worse than

BALANCING WORK AND HOME

younger staff. A survey of workers at supermarket group Somerfield showed that 80 per cent of employees over 50 felt strongly committed to the company, compared with 62 per cent overall. And research by EEF, the manufacturers’ association, revealed that firms were particularly keen to keep older workers. Loss of specialist skills was cited by over three-quarters of respondents as a key concern, with 60 per cent describing it as a significant threat. EEF’s survey showed that older staff were not just valued for skills alone but also for their productivity. Some 54 per cent of businesses thought there was no difference in output between older and younger workers and just over a third said that mature employees were more productive. As flexible working becomes more

“Explain where workers can get further support and guidance. Be an active listener. Get people on board and encourage them”

popular, employees are growing confident of asking to work in a way that suits them. Worman says older workers “flex their muscles about when they want to work, in a different way from younger staff”.

She says everyone wants different things and the only way to make that happen is for managers to be in regular dialogue with staff. “Sell the idea. Make it clear. Explain where workers can get further support and guidance, and remember that the solution may have to change,” she says. Introducing flexible working is about striking the balance between workers’ preferences and the business need. “Be an active listener as an employer,” adds Worman. “Get people on board. Encourage them. Enable them to understand through information and support.”

CHAPTER 7

FINDING THE RIGHT INSURANCE Extending the working life of a healthy, older employee may make sense, says Edmund Tirbutt. But can employers afford the necessary insurance and what are the effects of employing older workers? What always goes up but never comes down? The answer to this teaser has traditionally been age, but it could just as easily be the number of employment regulations that directors must observe. The Employment Equality (Age) Regulations 2006 are among the most significant, and any business turning a blind eye to them could find themselves facing a costly employment tribunal. In a nutshell, the regulations ban discrimination against employees, contract workers, trainees or job seekers on the grounds of age, and this can have effects for businesses offering life assurance or health insurance. While most people would broadly support the idea of older people staying in the workforce, employers must make decisions with their eyes open. Employees cannot be treated less favourably on grounds of age unless the employer can prove objective justification (see Chapter 10). Without this, firms cannot force workers to retire before 65 and must consider requests from those wishing to work longer. Cost alone is not an accepted objective justification.

The choice for employers If businesses allow staff to work beyond 65, making sure that they aren’t discriminated against might cost money because age in some insurance

FINDING THE RIGHT INSURANCE

schemes, such as health and life assurance, can be a key underwriting factor, along with claims history and the number of scheme members. Some older employees can experience health problems, so insurers have to reflect the added risk in the cost of premiums. Guy Roberts, director of employee benefit consultants Portus

“When we explained to clients that they were effectively self-insuring employees over the age of 65, they were shocked”

Consulting, says: “We have seen more and more over-65s being employed by our clients during the past couple of years. This is in contrast to the stance commonly taken around the time of the introduction of the age regulations, when employers were noticeably wary and their legal advisers tended to warn them against taking risks.” Employers wishing to insure workers beyond 65 have three alternatives: ■ Raise the age limit for the whole insurance scheme. ■ Insure the individuals concerned through single policies. ■ Self-insure risks by paying the claims themselves.

Raising the age limit… and the costs For large life assurance schemes employers are happy to raise the scheme age limit to at least 70 because greater life expectancy means that the costs of doing so are not a big issue. According to the Office for National Statistics, average life expectancy in the UK is 77.2 years for a male and 81.5 years for a female. But with health insurance products, employers could find the cost of raising scheme limits prohibitive. For example, providers of private medical insurance,

FINDING THE RIGHT INSURANCE

which enables those to be treated quickly in a private hospital, are aware from experience in the individual market that people are more likely to claim once they have reached their sixties. With income protection, which pays money regularly to those who are unable to work due to long-term illness or injury, premium increases for the over-65s can be even steeper.

Where to look for cheaper cover Employers who raise income protection age limits to 70 can offset some of the costs by switching to a cheaper scheme that pays out benefit for a maximum period of two, three or five years. The standard limit is up until the scheme member’s planned retirement date. Alternatively, some companies prefer to insure health risks on an individual basis or self-insure. Worryingly, some effectively self-insure by default when they ignore the issue or forget to notify the insurer of their plans. Bob Free, national business development manager at Canada Life, says: “Just because employers have consulted lawyers about employing people past the age of 65 doesn’t mean they’ve remembered to tell their insurer and make sure arrangements have been made. We have had experiences where clients have forgotten to inform us and have assumed everything was OK. When we explained they were effectively self-insuring, they were shocked.”

What are the options for over-75s? Employees wishing to work after their 75th birthday could cause a headache. Tax rules do not allow group life cover to extend beyond 75 and insurers are unlikely to quote above this limit for group health insurance. It remains unclear whether the inability to obtain cover would justify not providing it because a tribunal could argue that the employer has the financial strength to self-insure.

FINDING THE RIGHT INSURANCE

Flexible benefits schemes, where employees can top up core components of insurance cover, represent another area of confusion because the cost of add-ons rises with age. It is still unclear whether this amounts to discrimination. Glenn Laming, sales director for group protection at Legal & General, says: “It may be possible to objectively justify age-rated bands because insurance policies have always reflected the cost of the age risk. But there is still a big question mark, and some experts are certainly concerned.”

Keep up to date with the law Further changes in the law are being brought forward by the Equality Bill published in April to harmonise existing UK discrimination law. For some, this may be raising new uncertainties in the area of financial services. Audrey Williams, head of discrimination law at solicitors Eversheds, says: “One of the proposals is to extend age discrimination provisions beyond employment to apply to customers and clients, including insurers. This is likely to mean that it becomes unlawful for insurers to impose exclusions or charge more because of age, without paying attention to the individual risk. “There will be consultation this summer, which will include the financial services and insurance sectors and will establish what exemptions should be allowed. It’s not impossible that insurance could be exempt.” Another possible change in the law may be to the default retirement age which is currently permitted by the age discrimination regulations. The government has said it will be reviewed by 2011. Sue Sneddon, employee benefits technical manager at Aegon Scottish Equitable, says: “I personally feel it’s unlikely that it will be retained at 65 because

FINDING THE RIGHT INSURANCE

it was put in originally to encourage a shift in culture to make employers look beyond age. I feel it will either be raised or, more likely, abolished.” Heyday, part of Age Concern, has been arguing that the ability to compulsorily retire employees at 65 infringes European discrimination law. The European Court of Justice has ruled that this is not the case provided the member state can provide an objective justification. Williams at Eversheds adds: “The Heyday case is going back to the High Court first and could experience many appeals before going to the House of Lords. But the UK’s Equality and Human

“The default retirement age of 65 was originally put in to make employers look beyond age. I feel it will be raised or abolished”

Rights Commission is also going to push for the Equality Bill to abolish the default retirement age altogether.” Insurance experts say it is unthinkable that the government, which is asking employers to look at employee wellness, could allow a situation to develop in which group cover becomes unaffordable. They hope to obtain an exemption for insurance. Ron Wheatcroft, technical manager at Swiss Re, says: “The positive news is that the insurance industry and the government are working towards a solution. Progress is slow, but I am optimistic that we will get some kind of exemption.” Companies wishing to retain older workers should focus their energies on talking to insurers about the costs and availability of cover rather than worrying about an unlikely doomsday scenario.

CHAPTER 8

THE COST OF LONGER WORKING LIVES Employees nearing retirement are not putting enough away for life beyond the workplace. How should they maximise their savings and what can businesses do to help? Debbie Lovewell reports on the pensions problem The prospect of spending retirement scrimping and saving is a depressing thought. Yet this could become a reality for many people. Figures from the National Institute of Economic and Social Research in April showed that many UK workers will either need to save harder or postpone retirement for at least five years if they are to enjoy the same standard of living as today’s pensioners. Employees may extend their working lives in order to give themselves more time to build up their pension fund before they retire. This trend has been highlighted in the current economic climate, which has seen pension funds fall in value. Online data from Trustnet shows the median balanced managed definedcontribution (DC) fund fell by around 13.4 per cent in the year to April 2009. Matt Pitcher, senior wealth adviser at Towry Law, says: “The attraction is employees stay on and see a recovery in their fund.”

The choice for employers Whatever the reasons for extending working life, employees and employers will need to consider the impact on pension schemes. Legally, businesses must give someone who works beyond the scheme’s normal pension age the same benefits as someone in a comparable position who is below that age, unless different treatment can be objectively justified. So normal pension scheme

THE COST OF LONGER WORKING LIVES

membership should continue on the same basis as for a younger employee. Staff have to take their pensions benefits by age 75. But there are exemptions around several pension practices for employers to consider, such as using a maximum of length of service in calculations. They may also want to consider whether to allow employees to continue working while drawing their pensions.

Defined-benefit schemes If employers do allow employees to accrue further benefits in a DB plan, there are measures they can take to limit the total amount that can be built up. Julian Le Fanu, policy adviser at the National Association of Pension Funds (NAPF), explains: “In a DB scheme, there is likely to be a maximum amount staff can build up to [for example] two-thirds of final salary.” Companies will need to consider how any additional benefits provided through a DB scheme will be affected once employees pass normal pension age. Andy Savage, regional director at consultancy JLT Benefit Solutions, says: “If the trust is providing [risk benefits such as] group income protection and life assurance, the employer should take a view and consult lawyers to ensure it does not fall foul of age discrimination legislation.” The cost of providing risk benefits for staff over 65 will depend on the insurer, but it will be more expensive than for younger staff. Some insurers also limit the age up to which they will provide cover.

Defined-contribution plans Where employees accrue pension benefits past the normal pension age, it is administratively quite simple for employers who operate a definedcontribution pension. If employees reduce their hours when continuing to work past retirement age, employers must calculate how this will impact on pension

THE COST OF LONGER WORKING LIVES

contributions and future accrual, particularly where these are calculated as a percentage of salary. This could become more of an issue in the future. According to the results of the Death of Retirement report published by Standard Life in February, one in three people aged 46-65 want to continue working past normal pension age. Employees over 50 (or 55 from April 2010) who want to continue working but with added flexibility may be able to opt to draw down from their pension fund while still in employment—otherwise known as flexible retirement. Andrew Tully, senior pensions policy manager at Standard Life, says: “Many people are interested in gradually easing into retirement. Income drawdown suits these people as they can turn income up and down to suit circumstances.”

Income drawdown Whether staff are able to turn income up or down will depend on the employer as well as the pension scheme’s rules. “You have to distinguish between defined-benefit and defined-contribution schemes,” says Le Fanu at NAPF. “In both cases, employees have an option to take a quarter of [their fund] out as a tax-free lump sum.” Taking an income from a pension fund before retirement is simpler to implement with a DC plan, particularly for contract-based schemes, such as group personal pensions. Calculating how much they will need to accrue to provide their desired retirement income can be tricky, particularly for DC scheme members whose fund’s value will vary according to investment performance. According to research published by JLT Benefit Solutions last December, 41 per cent of workers do not believe they are saving enough into their pension and almost a third (32 per cent) of respondents are very worried about under-saving.

THE COST OF LONGER WORKING LIVES

Action plan for employers ■ Notify employees of the scheme’s normal pension age not more than one year, but no less than six months, in advance. ■ Employees who extend their working life must be given equivalent pension benefits as a younger employee. Typically, this means pension scheme membership and contributions should continue on the same basis as for a younger staff member. ■ Make decisions on issues such as: Can an employee take benefits from the pension scheme while continuing to work? Should staff be permitted to continue to build up DB benefits or DC benefits? Inform staff about the outcomes. ■ Consider exemptions in the age regulations for pension practices such as using a maximum length of service in calculations. Employers also need to weigh up what they will need to do around these issues. ■ Look at associated benefits, such as life cover or group income protection, and decide how staff working past normal pension age will be affected by these.

How do employees measure savings? Pensions modelling tools allow employees to tell if they are on track to accumulate sufficient funds. These are available from most pension providers and let individuals work out how much they will need to save based on factors such as desired retirement age and length of time until retirement. As a rough approximation, someone should work out the income they want in retirement (for example, half of their current earnings, but taking account of inflation or earnings between now and their retirement age) and multiply by 20. Standard Life’s Tully says: “The earlier people start to save the better, as compound interest plays a great part. If one person saves £1,000 a year for 40 years, and another saves £2,000 for 20 years, they will each have saved

THE COST OF LONGER WORKING LIVES

£40,000. But, at retirement, the one saving for 40 years would have a fund of almost £90,000 whereas the one saving for the shorter period would have a fund of less than £60,000, (both assuming a return of 3.5 per cent a year).”

Understanding pensions law Keeping up with changing pensions law can seem like a mammoth task for employers and staff. Paul Marks, pensions technical consultant at Gissings, says: “Pensions remain impenetrable for most people. The industry is not good at putting things in simple, understandable terms and people just switch off.” While employers are not required to do anything to help staff understand changing legislation, or to help them plan for retirement, many provide access to financial education or advice. Trustees have to provide information about pension benefits. Pre-retirement education can help staff find out if they have built up a sufficient pension pot, as well as understand the options open to them, such as whether to retire or extend their working life. Informing staff can be as simple as placing details on a company intranet site or issuing staff with pensions booklets. If scheme management is outsourced to an investment manager, it may have a helpline or Web page for members.

THE COST OF LONGER WORKING LIVES

Guiding staff in the pensions maze Bus and rail operator FirstGroup is flexible in its approach to pensions for staff working beyond normal retirement age. John Chilman, group reward and pensions director, says: “Some employees get to age 65 and are shattered. Others come to us late in life and at 65 are as fit as a fiddle [so carry on working].”

The company, which operates an open defined-benefit arrangement (comprising both career average and final-salary schemes), offers several options around pensions to staff who extend their working life.

For example, employees can opt to take part of their fund and not accrue further benefits, or continue to build up their pension pot without drawing on it. Staff can also draw down part of their fund while continuing to accrue benefits if they reduce working hours or take a lesser job on lower pay.

Chilman says FirstGroup places a great deal of importance on communication to ensure staff understand decisions. “We don’t want someone to take their pension at age 58, then get to 65 and not have enough to live on.”

THE COST OF LONGER WORKING LIVES

A brief history of pensions In 19th century Britain, for the overwhelming majority of people, there was no pension or retirement, other than for those lucky enough to have beneficent masters who endowed them with a settlement when they were too old to work. For most, it was a case of “work till you drop”. This year marks the 100th anniversary of the first state pension, the result of David Lloyd George’s “People’s Budget” of 1909. But this was awarded only to those over 70 and on an income of 12 shillings a week or less. The state pension was extended to all workers over 65 in 1928.

The state pension, as we know it now, was introduced in the 1946 National Insurance Act. In 1959, this was topped up by a “graduated pension”, which was replaced by the State Earnings Related Pension Scheme (SERPS) in 1978 (now called the State Second Pension). During this period, workplace-based pension saving also boomed. Schemes were typically defined benefit, promising to pay a set proportion of final salary for each year of pensionable service. But such schemes have become less common and, with greater life expectancy and high contribution rates required of employers to fund the “pension promise”, this trend looks set to continue.

Most schemes now are defined contribution, where a set percentage of salary is saved, with the amount of retirement income depending upon the size of the fund. This is linked to the investment performance of that fund. It is thought that during your working life there needs to be a saving, from employer and employee combined, of 15 per cent of salary per annum to stand a fair chance of a pension income equivalent to 50 per cent of final salary. The National Association of Pension Funds says the current combined average saving is 11.2 per cent each year.

As well as the basic state pension, 2003 saw the introduction of the Pension Credit: means-tested retirement benefits designed to lift the poorest pensioners—typically those with no, or little, other pension saving—out of poverty. MALCOLM SMALL

CHAPTER 9

HEALTH AND SAFETY IS FOR EVERYONE Some older employees may be more prone to long-term health problems than younger staff, but early intervention in the workplace can reduce the number of days lost to business, writes Sarah Hanson If people are living and working longer, businesses must ensure employees are as fit as possible and this means providing a safe and healthy workplace for all staff, regardless of age. But judging by figures from the Health and Safety Executive (HSE), there is still much work to be done. In 2007-08, 28 million days were lost due to workrelated ill-health and six million through workplace injury, with more than 2,500 individuals forced to stop working altogether. The estimated annual cost to British employers is around £7.8bn.

Busting the age myth Contrary to popular belief, sickness absence and workplace injury are not higher among older workers than younger employees, according to the 2005 HSE report, Facts and Misconceptions About Age, Health Status and

Employability, which says the picture is more complicated. Aiming to explode some of the myths on ageing, the report shows that it is younger workers who are more prone to short-term absences—the biggest source of disruption for employers. Such absences are often caused by social and psychological factors that are outside the control of businesses. On the

HEALTH AND SAFETY IS FOR EVERYONE

other hand, older employees are off sick for longer periods. Chronic ailments, such as musculoskeletal problems and stress (the most commonly reported illness types) are often the cause. But these can be minimised by early intervention in the workplace. Similarly, the report finds that younger workers have a higher accident risk and suggests that older employees may help improve an organisation’s health and safety culture as they often take a more responsible attitude to hazards based on their number of years in the workplace.

The challenge for baby boomers Catherine Cottam, head of the external diversity policy team at the HSE, says there are still many stereotypes regarding the hiring of older workers, which, although they may not be accurate or recognise the benefits of employing more mature staff, may influence their recruitment and retention. “Health and safety is, on occasions,

“Contrary to popular belief, sickness absence and workplace injury are not higher among older workers than younger employees”

used to justify discriminating against older workers,” says Cottam. “A positive and sensible approach to risk management can and should, in most circumstances, encourage the inclusion of older workers in the workplace.”

The Employment Equality (Age) Regulations 2006 were introduced to ensure older workers are not denied the opportunity to stay in work. But this is not to say that businesses must retain all employees, even if they have health problems. The legislation does not prevent employers from dismissing a worker who isn’t able to fulfil their responsibilities, but age cannot be used as a reason

HEALTH AND SAFETY IS FOR EVERYONE

to determine a person’s fitness to do a job. In 2006, the Oxford Institute of Ageing found that age-related cognitive decline in functions such as thinking, memory, learning, attention span and use of language is gradual so that the impact on those of working age—up to 65 or 70—may be limited. Yet Ready, Willing and Able, a report published by the TUC in 2006, revealed that more than a million workers from Britain’s post-war baby boom generation are struggling to find employment because of their age.

Why attitudes must change If the government is to achieve its aim of reaching an employment rate of 80 per cent then attitudes to employing older people, as well as working conditions, must change. Chris Ball, chief executive of The

“When conducting risk assessments, companies should keep in mind the varying capacities of all their workers”

Age and Employment Network (TAEN), says the responsibility of the employer is always to provide a healthy and safe workplace. When conducting risk assessments, companies should keep in mind the varying capacities of all workers and

treat each one as they find them. “Within a given population of workers, of any particular age cohort, you’re still going to find many of widely varying abilities, capacities and bases of health and wellbeing,” he says. But Ball acknowledges that there are probably some issues that can be singled out as risks when assessing older workers, but which are “no more than common sense”. He adds: “Many people, but not all, experience conditions that deteriorate over the period of a lifetime. But with a safe and proper

HEALTH AND SAFETY IS FOR EVERYONE

approach to work you can help to alleviate the onset or the worsening of those sorts of conditions.” Ball says a worker who has been sitting at an incorrectly positioned workstation over a period of many years may begin to experience aches, pains and even arthritic conditions in their neck, shoulders, head or arms. Similarly, he adds, hazards such as exposure to noise, toxic chemicals, dangerous substances, dust particles, work that puts a big strain on the body and repeated long-term rotating shifts all have an accumulating effect. A stressful professional life can be

“With a safe and proper approach to work, you can help to alleviate the onset or the worsening of health conditions”

dangerous, too. Research published in 2006 by University College London found work-related stress to be a major cause of type 2 diabetes and heart disease in a 14-year study of 10,000 civil servants aged between 35 and 55.

Ball says: “All the best-practice guidelines—the wearing of protective clothing and equipment and removal of the hazard—apply equally to older workers as to younger workers.” But, he notes, there will be situations where, for example, an older worker has been exposed to noise or vibration for all of their working life and their tolerance levels fall. “Working in a noisy industrial environment for someone who has already got poor hearing can not only make it extremely difficult for that person to operate but can actually make their hearing worse,” says Ball. “Therefore, finding alternative work for someone in that situation is the sort of thing you need to look into. This is applicable to people of all ages and it is a prevention-ratherthan-cure approach that I would advocate.”

HEALTH AND SAFETY IS FOR EVERYONE

Fit for work at BT The prevention strategy is highly valued at telecoms giant BT, which focuses health and safety policy across the age groups. Dennis Gissing, the company’s head of people practices, says: “There is nothing specific we are doing for older workers, but we are doing a lot on health and safety for workers. The facts of life are that we are more likely to acquire debilitating illness or terminal illness the later we get in life, but we can equally acquire a disability, or an illness or a fitness issue, when we’re 20, 30 or 40.” As well as offering generous sick leave, access to occupational health advice and counselling, BT’s eNable programme supports workers who already have, or may acquire, a disability. This may involve adjustments to workstations and equipment, finding another role for them or retraining. “But the other big thing that we’re aware of is preventative measures,” says Gissing. “A lot of medical conditions are related to lifestyle, so we’ve put a lot of focus on helping people to think more about their health. The big area is around diet and exercise. We’ve done a lot of promotion on trying to get people to think about what they eat and how they exercise. To coincide with the smoking ban we offered advice on giving up smoking. We’ve also had campaigns around mental health, stress, cancer awareness and encouraging people to get tested for diabetes.” Gissing reckons it’s easy for employees not to think about work-life balance and how important their health is when they are working hard, but that there are lots of things employers can do in the workplace to support people’s health. “Very often that might well be something that’s more useful for the older worker than it is for the younger worker,” he says. “But what we don’t do is say, ‘you’re 50, here’s a set of policies for you’. People can be unfortunate enough to have

HEALTH AND SAFETY IS FOR EVERYONE

10 steps to a healthy workforce How companies can make health and safety practices more age positive. ■ Ensure a job’s physical requirements are clearly specified during recruitment and interviewing. ■ Carry out risk assessments routinely, not just when an employee reaches a certain age—this cuts health-related absenteeism across the company. ■ Assess the activities involved in jobs and modify workplace design if necessary. Questions to ask include: Can you remove the need for heavy lifting? Should workstations be altered to avoid repetitive twisting, stretching or bending? Can lighting be improved to allow for eyesight changes? Is the seating right for the job? ■ Make adjustments on the basis of individual and business needs, not on age. ■ Consider modifying tasks to help people stay in work longer, such as shifting responsibilities from physically strenuous to mentally challenging roles. But make sure you provide appropriate retraining. ■ Allow staff to change work hours and job content. For example, consider employing experienced workers on a part-time or consultancy basis to make the most of their skills and knowledge. ■ Don’t assume that certain jobs are too demanding for older workers—base decisions on capability and objective risk, not on age. ■ Encourage or provide regular health checks for all staff, regardless of age. ■ Persuade staff to take an interest in their health and fitness. This helps retain workers and improves morale. ■ Consider other legislative duties, such as the Disability Discrimination Act or flexible working legislation. These could require businesses to make adjustments to help an employee with a health issue or consider a request to work flexibly.

horrible illnesses and incapacities in their twenties, so it’s dangerous to say we’re going to start going through these processes when you’re 60. First, it’s discriminatory and, second, probably a waste of time because that person is perfectly fit and happy. It’s about looking at preventative measures and the work-life balance.”

CHAPTER 10

STAYING WITHIN THE LAW From recruitment to retirement and pay to benefits… the latest age discrimination laws will have a big impact on the way employers operate. Vanessa Hogan, senior associate lawyer at Lovells, offers a guide Four out of 10 British workers will be aged 45 or over next year. And there will only be enough young people to fill one in three of all new or replacement jobs. The issue of age legislation has never been more important, but few employers are facing up to the challenges. The Employment Equality (Age) Regulations 2006 make it illegal to discriminate, either directly or indirectly, against employees because of their age. The law also: ■ Allows a default retirement age of 65 for employees (but not partners in firms of solicitors or office holders such as directors and non-executive directors). This will be reviewed in 2011. ■ Removes the upper age limit of 65 for unfair dismissal claims. ■ Gives employees the right to request to work beyond 65. ■ Covers individual terms and conditions of employment, working conditions, pay and benefits, and applies to both public and private sector employers. ■ Protects current, past and prospective workers and makes discrimination on the grounds of age, older and younger, unlawful. Compensation is uncapped and in the first 18 months after the legislation was passed, there were almost 4,000 claims.

STAYING WITHIN THE LAW

Who is protected? The regulations extend beyond employees to agency workers and some contract workers. They also protect paid office holders, such as directors and non-executive directors, and partners of firms.

What is age discrimination? ■ Direct discrimination is where an employer treats an individual worker less favourably than others because of age. For example, it may not provide a benefit such as medical insurance for anyone over a certain age. ■ Indirect discrimination is where an employer’s practice or policy puts individuals in a certain age group at a disadvantage, unless the action can be objectively justified (see below). An example is demanding employees have a particular length of service before they become entitled to a benefit. ■ Harassment is unwanted conduct that violates a person’s dignity or creates an intimidating, hostile, degrading, humiliating or offensive environment. With remarks about age considered normal banter at work, companies must change the workplace culture if they are to protect themselves against claims. ■ Victimisation is where an employee suffers wrongful treatment from an employer over a complaint linked to age discrimination laws. For example, a worker may be marked down at an appraisal following a protest about being overlooked for promotion because of age.

Defending your actions Employers may be able to defend direct and indirect age discrimination if they can provide what is called “objective justification”. Companies will have to show that they are in pursuit of a legitimate aim and that what they are doing is proportionate. This means the importance of their actions has to be measured against any discriminatory effect.

STAYING WITHIN THE LAW

A quick guide to the law The facts… ■ Compensation is uncapped. ■ The regulations protect all ages from discriminatory treatment. ■ Directors, non-executive directors, partners and the self-employed are also safeguarded. ■ Both direct and indirect age discrimination can be justified.

… and the fiction ■ Employers can dismiss workers at 65 without risk of unfair dismissal claims. ■ High premiums—for private health insurance or liability insurance—resulting from the ages of employees or officers justify discriminatory treatment. ■ Accepted practices in organisations or industry sectors will be sufficient evidence to justify discrimination.

Opinion is mixed over the correct test for justifying direct age discrimination. The Employment Appeal Tribunal (EAT) has ruled that the employer must determine any “legitimate aims” which would include aims specific to the business. But a European Court of Justice (ECJ) ruling is open to an interpretation which seems to suggest that the scope is narrower and only extends to objectives which can be considered to be social policy aims, such as those related to employment policy, the labour market or vocational training. The ECJ position is not entirely clear and it is yet to be clarified and applied by courts and tribunals in the UK. Companies defending indirect discrimination must show their aims were based on real need. The Department for Business, Innovation and Skills (BIS) has recently identified needs such as promoting health, welfare and safety, and the provision of training as being “potentially justifiable”. In the past two years, employment tribunals have accepted aims such as ensuring a spread of skills and experience in workers of all ages, encouraging

STAYING WITHIN THE LAW

turnover and preventing “blockages” in the flow of employees. Employers who are sued will need to show that the measures taken were effective in achieving their aims. And businesses must provide evidence of consulting employees.

Exemptions for employers The law provides exemptions for some service-related benefits. They include: ■ Benefits based on service of less than five years do not need to be justified. ■ Benefits that depend on a longer period of service must be linked to a need. Again, employers must be able to show the links between the need and the benefit. Canvassing employees for their views may be sufficient evidence. ■ The Court of Appeal has confirmed that length of service in a redundancy selection policy is not unlawful age discrimination. The court ruled that the “legitimate aim” was the desire for a stable workforce. It is worth noting that the five-year

“The Court of Appeal has confirmed that length of service in a redundancy selection policy is not unlawful age discrimination”

exemption for service-related benefits does not apply to severance payments such as redundancy packages calculated by length of service. These will need to be objectively justified.

Retirement The regulations allow employers to retire employees aged 65 or over. Provided the employer follows appropriate procedure and gives at least six months’ notice of retirement before the planned date, it can reject any request to work beyond that date and the employee can be lawfully dismissed. This provision was challenged in the Heyday case, brought by Age Concern (see page 49).

STAYING WITHIN THE LAW

Action plan for employers Working without a retirement age ■ Consider opportunities for flexible working and flexible retirement, in order to retain skills and experience. ■ Continue to assess and manage the performance of older workers in the same way as for other workers.

Working with a retirement age ■ Follow the procedures by writing to employees at least six months before your company's retirement age (which cannot be less than age 65, unless objectively justified); inform employees of their right to request to continue working, discuss options with them at an interview and inform them of the outcome. (Check ACAS for complete compliance procedures.) ■ Consider the aim and impact of any potentially discriminatory practice or policy before it is introduced. ■ Gather evidence to support the business aim you wish to achieve.

Don't... ■ Assume workers want to leave work when they reach 65. ■ Assume workers' performance inevitably worsens as they grow older. ■ Encourage an environment where age-related banter is acceptable.

The ECJ has confirmed that a default retirement age is lawful if it can be objectively and reasonably justified by a legitimate social policy aim. The High Court will now decide whether the UK’s default retirement age of 65 is justified. If the High Court upholds the Heyday challenge, UK businesses will no longer be able to dismiss employees lawfully simply because they reach 65. The default retirement age does not apply to office holders. Businesses will need to objectively justify decisions to retire them.

STAYING WITHIN THE LAW

Conclusion The regulations are the biggest development in UK employment law in a generation. They are also a key part of the government’s plans to address the demographic of an ageing workforce. The employment liability risks are significant—compensation is uncapped, and the area is a fertile ground for litigation. On the brighter side, many employers have experienced the benefits of attracting and retaining older workers. They believe that businesses looking for a competitive advantage need to have in place practices that are beyond the minimum required to keep within the law.

CHAPTER 11

LOOKING AHEAD For many people, working beyond 65 is a key part of their retirement plans. But for others, inadequate income means it is a priority. Malcolm Small describes how employers can make the most of their talents In this chapter, we will look at why we may expect larger numbers of older workers in the future, what this means for society, especially younger workers, as well as the steps businesses must take to employ and retain older people.

Lower savings First, let’s find out what is driving the over-65s to stay active in the workforce. This is a recent phenomenon, although there have been many examples of business owner-managers not retiring at all, or stopping work late in life. Estimates of expected retirement age are changing. A few years ago, research showed people thinking of retiring in their fifties. Research by LIMRA Europe suggests that most now expect to stop work aged between 60 and 65, although nearly half still imagine they will retire before 60. For many, this will not be possible. The economics of building up a large enough retirement fund for a 20-year plus “retirement” from, effectively, a 35-year working life, simply don’t stack up for most employees. The Pensions

Report, published in 2006 and 2007 by the Institute of Directors, shows that younger workers seem aware of this, and do not think they will retire until much later in life. This suggests they are relaxed about the idea of continuing to work. The move from defined-benefit to defined-contribution schemes (with lower

LOOKING AHEAD

contribution levels) is likely to result in falling rates of pension saving if this trend continues. The generation we have just seen going into retirement typically had good defined-benefit pension income. Lower savings rates linked with definedcontribution schemes and lower participation rates mean that many people are under-saving, or not saving at all, for retirement. The Pensions Commission in 2004 estimated that seven million people were in this latter category and recent commentators are suggesting this figure may be closer to 10 million, not far short of half the private sector workforce. In response to this, employers will be required to automatically enrol their employees (with qualifying earnings within set limits) into a qualifying pension scheme from 2012.

When working after 65 is a priority Sheer economics suggest that for many people carrying on with paid work will be vital. Recent research from LIMRA Europe shows that continuing to work is now an active, and popular, part of many people’s “retirement” plans, allowing them to enjoy a better standard of living for longer. The second reason is the

“Take a look round your local supermarket soon and see how many retirees you can spot working. The number may surprise you”

comparative shortage of skilled labour and of young workers, given the low birth rates of the last 30 years. Employers recognise the need to retain skills in their businesses and those abilities are often found in senior workers.

Furthermore, older employees are often excellent in customer-facing roles. Take a look round your local supermarket and see how many retirees you can spot working. The number may surprise you.

LOOKING AHEAD

Third, it’s a matter of choice. Even with a reasonable pension income, older people are often making active choices to remain in the workforce. Motivations vary, but the social and financial aspects of work are often prominent. The baby boomers are now at or approaching retirement, and there is evidence that they will have different attitudes to the generation 10 years ahead of them. They don’t have quite such good pensions as the age group that preceded them, but they’re still adequate. This will be a sizeable group. But it seems likely that they will still

“Many people at or beyond state pension age are still fit and are simply not ready to put their feet up. They remain engaged with work”

want to travel and be active in a range of different ways, which will take money that can’t be supplied by pension income alone. In the case of people with professional skills and technical knowledge, consultancy work may appeal,

allowing time for family and the pursuit of other interests. Teaching opportunities may also emerge for skilled manual workers.

Over 60, online and active There is anecdotal evidence of “grey entrepreneurs” emerging, using a lifetime of knowledge and contacts built up in their line of work to start businesses after retirement. Furthermore, many people at or beyond state pension age are still fit and are simply not ready to “put their feet up”. They are comfortable with new technology, increasingly online, and remain interested and engaged with their work. This cannot be true for all people, of course. Some people in manual occupations may be unable to perform their jobs through injury or illness, or may

LOOKING AHEAD

not be fast enough at work in later life to be commercially useful, and society needs to make provision for them. The next wave of over-65s will have smaller pensions but higher expectations, and be fitter and more active than any generation before them. This is an international phenomenon, not just the case in the UK.

How will younger workers react? International research is optimistic about the prospects for workplace harmony. It seems younger employees enjoy having older workers around, provided they are not treated differently and are subject to the same terms and conditions. Where employers are as positive

“The over-65s coming through will have higher expectations, and be fitter and more active than any previous generation”

about hiring older workers as younger workers, the reasoning for this needs to be explained to the wider workforce carefully, if resentment is not to build up. Younger staff can feel mentored by

older workers and can gain experience from them. And they don’t think much about retirement—only half of under-25s are making any pension contribution at all, according to LIMRA Europe.

What are the effects for employers? For employers, a much wider range of issues is thrown up. Some view older workers as slower and more expensive, with likely higher absence rates and poorer learning times. But research by the Employers Forum on Age firmly debunks this myth.

LOOKING AHEAD

Older employees are as keen to learn new skills as younger workers, have lower absence rates and are more loyal. This has led some employers, such as B&Q, the DIY chain, to take an upbeat view of older worker recruitment, with positive results for the business. Other employers suggest that older workers are harder to manage, or need different treatment, neither of which is true. In Australia, a business magazine recently carried an article headed “40,000 retirees to shelve retirement plans—here’s how you can benefit”. This referred to the sharp falls in

“Older employees are as keen to learn new skills as younger workers, have lower absence rates and are more loyal”

global stockmarkets and the slide in pension fund values, forcing many prospective retirees to defer retirement. One employer was quoted as saying: “We get excited when we go into a car dealership and buy a car with added extras at

no extra cost. It’s the same with older workers. You’re getting all these added extras—experience, a high level of skills, commitment and stability—for the same rate as an ordinary worker.”

Search for value and talent The Australian sentiment is increasingly common internationally, with older workers being valued as employees. That is not to say that they do not experience age discrimination in their search for employment—they do—but there is a sense of change. In the UK, the Department for Work and Pensions is consulting on flexible retirement, with consideration being given to policies to encourage employment of older workers, and to keeping them in the workforce beyond normal pension age. In the US, social policy bodies such as the Urban Institute have published

LOOKING AHEAD

papers examining strategies employers might need to retain senior workers. Last year, the Human Resource Management International Digest published a study of the factors behind B&Q’s positive approach to recruiting older workers. It found that clear communication of the strategy, and the reasons behind it, had been central to its success.

86… and still going strong The pace of change in this area is rapid, and much more remains to be done in terms of understanding the factors behind it—for employers and employees. What is clear is that continuing employment can bring better health and longevity to workers as well as economic benefits for businesses. Ownermanagers, in particular, seem to thrive from continuing to work. A friend of mine’s father runs a long-established property development and building firm. He has just come back from Nigeria, having finally secured a deal to build a shopping mall there. He is 86.

NOTES

RESOURCES

Here is a list of the resources and contacts noted throughout this guide, plus other useful sources of information and advice.

Government Department for Work and Pensions (DWP) www.dwp.gov.uk Age Positive www.agepositive.gov.uk ACAS www.acas.org.uk Directgov www.direct.gov.uk Department for Business Innovation and Skills www.bis.gov.uk Five steps to risk assessment www.hse.gov.uk/pubns/raindex.htm FSA Money Made Clear service www.moneymadeclear.fsa.gov.uk HM Revenue & Customs www.hmrc.gov.uk Health and Safety Executive www.hse.gov.uk Office for National Statistics www.statistics.gov.uk The Pensions Regulator www.thepensionsregulator.gov.uk Workplace Health Connect (for SMEs) www.workplacehealthconnect.co.uk For information on Individuals Savings Accounts www.hmrc.gov.uk/leaflets/isa.htm

RESOURCES

Key bodies Association of British Insurers www.abi.org.uk Association of Chartered Certified Accountants http://uk.accaglobal.com Association of Insurance and Risk Managers www.airmic.com British Occupational Health Research Foundation www.bohrf.org.uk Chartered Institute of Personnel and Development www.cipd.co.uk Equality and Human Rights Commission www.equalityhumanrights.com Employers Forum on Age www.efa.org.uk Institute of Directors (IoD) www.iod.com National Association of Pension Funds www.napf.co.uk Personal Accounts Delivery Authority www.padeliveryauthority.org.uk Pensions Ombudsman www.pensions-ombudsman.org.uk The Pensions Advisory Service www.pensionsadvisoryservice.org.uk The Pension Protection Fund www.pensionprotectionfund.org.uk Trades Union Congress www.tuc.org.uk

RESOURCES

Charities Age Concern www.ageconcern.org.uk Involve (employee involvement specialists) www.involve.org.uk PRIME, a network that helps people aged over 50 set up in business or self-employment www.primeinitiative.org.uk The Age and Employment Network www.taen.org.uk The Methuselah Foundation www.methuselahfoundation.org

Acknowledgements Aegon Scottish Equitable www.aegonse.co.uk Asda www.asda.co.uk B&Q www.diy.com BT www.bt.com Canada Life www.canadalife.co.uk Cass Associates www.cassassociates.co.uk City Sightseeing Glasgow www.citysightseeingglasgow.co.uk Eversheds www.eversheds.com

RESOURCES

FirstGroup www.firstgroup.com Friends Provident www.friendsprovident.co.uk Gissings www1.gissings.com Hay Group www.haygroup.co.uk Heritage Works www.heritageworks.co.uk JD Wetherspoon www.jdwetherspoon.co.uk Jelf Group www.jelfgroup.com JLT Benefit Solutions www.jltgroup.com Landmark Systems www.landmarksystems.co.uk Legal & General www.legalandgeneral.com LIMRA www.limra.com Lovells www.lovells.com Manchester Metropolitan University Business School www.business.mmu.ac.uk M&S www.marksandspencer.com Nabarro www.nabarro.com

RESOURCES

National Institute of Economic and Social Research www.niesr.ac.uk Nationwide www.nationwide.co.uk Newcastle Business School www.newcastlebusinessschool.co.uk Newham College of Further Education www.newham.ac.uk Pearn Kandola, business psychology consultancy www.pearnkandola.com Penna, HR consultancy www.penna.com Pimlico Plumbers www.pimlicoplumbers.com Plantronics www.plantronics.com Portus Consulting www.portusconsulting.co.uk Red IT www.red-it.co.uk Somerfield www.somerfieldgroup.co.uk Standard Life Death of Retirement report www.standardlife.com/static/docs/death_of_retirement.pdf Swiss Re www.swissre.com The Oxford Institute of Ageing www.ageing.ox.ac.uk The Urban Institute www.urban.org Towry Law www.towrylaw.com

Transporting pensions into the 21st century

promotional feature

Why one of Britain’s main transport operator’s flexible pension scheme helps retain valued older employees

irstGroup is a transport operator carrying 2.5 billion passengers a year. Its UK Bus division employs over 25,000 people and operates in 40 towns and cities, as

well as many rural areas. The company’s Flexible Pensions Options scheme allows employees between the ages of 50 and 75 who are able to receive their pension to work flexibly, as well as using their pension income to supplement their reduced pay. The scheme was introduced to help retain valued older employees (over 40 per cent of employees are aged 50 and over) and also to remove the ‘cliff edge’ impact of retirement. First also attracts staff from other companies. Brian Paget joined First at 61 after being made redundant following 35 years in the IT industry. When he saw that First was looking for drivers he felt sure that he could transfer his customer care skills and extensive driving experience. Brian says: “I never thought I would change career at my age, but it’s been an opportunity I wouldn’t have missed. I’ve had initial training and I’m now working towards an NVQ. FirstGroup’s reward and pensions director John Chilman accepts that there were challenges: “Some people felt that retaining older workers could block opportunities for younger employees. There were also concerns that the policy might ‘force’ people to stay in work.” To allay fears, FirstGroup used real examples of employees who wished to work beyond retirement. This proved very effective in showing flexible pension options to help improve retention, cut recruitment costs and address the needs and wishes of older workers. The benefits of the scheme were also explained with real examples in the scheme booklet. A website was created to enable members to model their benefits based on existing or different rates of accrual at their choice of retirement age. When the scheme was finally launched, briefings were delivered to each operating company in partnership with trade unions. For more information on what older workers can do for your business, visit www.businesslink.gov.uk/agepositive

FirstGroup believes

that innovative working practices can deliver,

even in very traditional industries.

John Chilman, reward and pensions director FirstGroup

EXTENDING WORKING LIVES How businesses can benefit from the skills of an ageing workforce The UK is a rapidly ageing nation. Medical advances mean we are living longer and the impact on our economy is immense. It is changing the way we live and work and has far-reaching consequences. Our current retirement and pension models are not sustainable. Living longer means we will have to work longer and save more. Sharper employers that have made their organisations appealing to older workers are reaping the benefits, with improved customer satisfaction and a healthier workplace culture. This guide outlines the challenges and opportunities for businesses of extending working lives. It gives clear guidance on best practice and explains how to achieve competitive advantage.

ISBN 978-1904520-74-0

781904 520740

£9.95