extending working lives

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EXTENDINGWORKING LIVES

How businesses can benefit from the

skills of an ageing workforce

A DIRECTOR’S GUIDE

£9.95

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

9 7 8 1 9 0 4 5 2 0 7 4 0

Supported by the Departmentfor Work and Pensions

1 Flannel rs 3/7/09 14:54

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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.

© Copyright July 2009 Printed in Great Britain

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.

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ABOUT THE SPONSOR

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CONTENTSIntroductionThe age challenge for employers 4Miles Templeman, director general, Institute of Directors

Foreword A wealth of experience 7Angela Eagle MP Minister for pensions and the ageing society

Setting the scene 9Malcolm Small, senior pensions policy adviser, Institute of Directors

The needs of a modern workforce 15Alison Coleman, freelance business journalist

Bringing down the age barrier 22Peter Bartram, freelance business journalist

The future of retirement 27Peter Bartram

How to manage older workers 33Claire Coleman, freelance journalist

Balancing work and home 39Claire Oldfield, freelance journalist

Finding the right insurance 45Edmund Tirbutt, freelance journalist

The cost of longer working lives 50Debbie Lovewell, deputy editor, Employee Benefits magazine

Health and safety is for everyone 57Sarah Hanson, associate editor, Director Publications

Staying within the law 63Vanessa Hogan, senior associate, employment practice, Lovells LLP

Looking ahead 69Malcolm Small

Resources 76

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INTRODUCTION

THE AGE CHALLENGE FOREMPLOYERS

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

5

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 isopen book on ageLeading UK book retailer discovers benefits of employing people at both ends of age spectrum

Our workforce is made up of people from mixed age Our workforce is made up

of people from mixed age Our workforce is made up

ranges, all of whom are of people from mixed age ranges, all of whom are of people from mixed age

committed to both the company and their jobs.

promotional feature

Anna Lloyd, head of HR, Borders UK Ltd

he experience of book retailer Borders UK Ltd supports

the statistical evidence that employing mature

candidates reduces absenteeism and staff turnover.

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, we’re also conscious that the UK has an ageing 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.”

T

people at both ends of age spectrum

Our workforce is made up

Chapter and verseSome of the main steps taken by Borders UK Ltd to broaden the age range of their workforce:

• Removed retirement age

• Invited all age groups to applyfor vacancies

• Removed age and qualifications from application forms

• Switched pension providerso that employer contributions reflect an employee’sposition rather than their age

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

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FOREWORD

AWEALTH OF EXPERIENCE

Angela Eagle MPMinister 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 drivescompany forwardHow one employer is using the skills and experience of older workers to narrow the skills gap

There are significant There are significant There are significant There are significant business benefits. By disregarding age, we maximise opportunities for people to fulfil their own potential and continue to contribute to the success of the business.

promotional feature

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

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

When Duncan reached the age of 65 he chose not to

retire as he wanted to keep working.

Amanda Jones, Head of Diversity at Co-operative Group

says; “Through actions such as the removal of our

retirement age and training our managers, we have

worked to ensure that our employees are judged on ability

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

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

There are significant business benefits too, says Angela

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

S

How one employer is using the skills and experience of older

There are significant There are significant There are significant There are significant

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CHAPTER 1

SETTING THE SCENELiving 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.

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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

suggested that the “dependency

ratio”—the measure of people of

working age to those above state

pension age—would become

unsustainable at nearing two-to-

one. 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.

“Living longer is surely agood thing, and there aremany ways in which peopleand governments can riseto the challenge”

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:

n 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.

n 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.

n 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,

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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

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.

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SETTING THE SCENE

“Australia recognised thelooming retirement savingsproblem early. They seemto be tackling the issue ofunder-saving well”

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

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

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SETTING THE SCENE

“Any loss in speed andagility among older workersis often compensated by an increase in theiraccuracy and reliability”

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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.

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CHAPTER 2

THE NEEDS OF AMODERN 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.

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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 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

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Plugging the skills gapAt 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.

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 non-

cash 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

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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-

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Older and still valuedIn 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.

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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.

Top tips for employers n Assess the age profile of your workforce and the impact that future changes

to this may have on the organisation.

n 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.

n 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.

n 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.

n 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.

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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 knowledge-

sharing 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.

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CHAPTER 3

BRINGING DOWN THEAGE 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.

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

23

BRINGING DOWN THE AGE BARRIER

24


the UK economy. Michelle Mitchell,

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.

“It’s economic nonsense to cast aside the vastexperience of people over65, particularly when we arefaced with a skills gap”

“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

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.

25


“Older staff like talking topeople and are willing tospend time making surethat customers are having a good experience”

26


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.”

THE FUTURE OFRETIREMENT

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.

27

CHAPTER 4

28

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

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

“For some, retirement is anabsolute contrast to whatthey have done at work—a time to do somethingcompletely different”

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

29


10 ways to keep older workers engaged1. 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.

30


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 money-

making 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.”

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.”

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10 ways to work after retirement1. 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 part-

time 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.

32


Cass is taking on part-time work in

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.”

“Many individuals have yetto recognise the value of a planned approach toretirement and thecomplexity of decisions”

HOW TO MANAGEOLDER 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.”

33

CHAPTER 5

34

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

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.

“You must look at people’smotives for working—is itpurely financial, becausethey enjoy it, or becausethey want company?”

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.”

35


Carry on working… and draw a pensionWhat 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.

36


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,

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.”

37


Talent across the agesCharlie 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.”

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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 serviceLeon 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.”

BALANCING WORKAND 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.

39

CHAPTER 6

40

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

41


Flexible retirementHow 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.

42


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-

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

“It’s about accessing skillsyour business needs. It’sabout managing the talentpipeline, and managing it in a smarter way”

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

43


10 ways to work flexiblyFlexible 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.

44


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

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.”

“Explain where workers can get further support andguidance. Be an activelistener. Get people onboard and encourage them”

FINDING THERIGHTINSURANCE

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

45

CHAPTER 7

46

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

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:

n Raise the age limit for the whole insurance scheme.

n Insure the individuals concerned through single policies.

n 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,

“When we explained toclients that they wereeffectively self-insuringemployees over the age of65, they were shocked”

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.

47


48


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

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

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.

49


“The default retirementage of 65 was originally putin to make employers lookbeyond age. I feel it willbe raised or abolished”

50

CHAPTER 8

THE COST OF LONGERWORKING 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 defined-

contribution (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

51

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 defined-

contribution pension. If employees reduce their hours when continuing to work

past retirement age, employers must calculate how this will impact on pension

52


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.

53


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

Action plan for employersn Notify employees of the scheme’s normal pension age not more than one year, but

no less than six months, in advance.

n 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.

n 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.

n 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.

n 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.

54


£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.

55


Guiding staff in the pensions mazeBus 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.”

56


Abrief 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

57

CHAPTER 9

HEALTH AND SAFETYIS 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 work-

related 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

58

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,

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

“Contrary to popular belief,sickness absence andworkplace injury are nothigher among older workersthan younger employees”

59


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

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

“When conducting riskassessments, companiesshould keep in mind thevarying capacities of all their workers”

60


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

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-rather-

than-cure approach that I would advocate.”

“With a safe and properapproach to work, you can help to alleviate theonset or the worsening ofhealth conditions”

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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

62


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.”

10 steps to a healthy workforceHow companies can make health and safety practices more age positive.

n Ensure a job’s physical requirements are clearly specified during recruitment

and interviewing.

n Carry out risk assessments routinely, not just when an employee reaches a certain

age—this cuts health-related absenteeism across the company.

n 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?

n Make adjustments on the basis of individual and business needs, not on age.

n 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.

n 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.

n Don’t assume that certain jobs are too demanding for older workers—base

decisions on capability and objective risk, not on age.

n Encourage or provide regular health checks for all staff, regardless of age.

n Persuade staff to take an interest in their health and fitness. This helps retain

workers and improves morale.

n 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.

63

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:

n 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.

n Removes the upper age limit of 65 for unfair dismissal claims.

n Gives employees the right to request to work beyond 65.

n Covers individual terms and conditions of employment, working conditions,

pay and benefits, and applies to both public and private sector employers.

n 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.

64


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?

n 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.

n 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.

n 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.

n 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.

65


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

Aquick guide to the lawThe facts…

n Compensation is uncapped.

n The regulations protect all ages from discriminatory treatment.

n Directors, non-executive directors, partners and the self-employed are

also safeguarded.

n Both direct and indirect age discrimination can be justified.

… and the fiction

n Employers can dismiss workers at 65 without risk of unfair dismissal claims.

n High premiums—for private health insurance or liability insurance—resulting from

the ages of employees or officers justify discriminatory treatment.

n Accepted practices in organisations or industry sectors will be sufficient evidence

to justify discrimination.

66


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:

n Benefits based on service of less than five years do not need to be justified.

n 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.

n 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

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).

“The Court of Appeal hasconfirmed that length ofservice in a redundancyselection policy is notunlawful age discrimination”

67


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.

Action plan for employersWorking without a retirement age

n Consider opportunities for flexible working and flexible retirement, in order to retain

skills and experience.

n Continue to assess and manage the performance of older workers in the same

way as for other workers.

Working with a retirement age

n 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.)

n Consider the aim and impact of any potentially discriminatory practice or policy

before it is introduced.

n Gather evidence to support the business aim you wish to achieve.

Don't...

n Assume workers want to leave work when they reach 65.

n Assume workers' performance inevitably worsens as they grow older.

n Encourage an environment where age-related banter is acceptable.

68


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.

69

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

70

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 defined-

contribution 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

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.

“Take a look round yourlocal supermarket soon andsee how many retirees youcan spot working. Thenumber may surprise you”

71

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

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

“Many people at or beyondstate pension age are still fitand are simply not ready toput their feet up. Theyremain engaged with work”

72

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

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.

“The over-65s comingthrough will have higherexpectations, and be fitterand more active than anyprevious generation”

73

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

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

“Older employees are askeen to learn new skills asyounger workers, havelower absence rates and aremore loyal”

74

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. Owner-

managers, 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.

75

NOTES

76

RESOURCES

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

GovernmentDepartment for Work and Pensions (DWP)www.dwp.gov.uk

Age Positivewww.agepositive.gov.uk

ACASwww.acas.org.uk

Directgovwww.direct.gov.uk

Department for Business Innovation and Skillswww.bis.gov.uk

Five steps to risk assessmentwww.hse.gov.uk/pubns/raindex.htm

FSA Money Made Clear service www.moneymadeclear.fsa.gov.uk

HM Revenue & Customswww.hmrc.gov.uk

Health and Safety Executivewww.hse.gov.uk

Office for National Statisticswww.statistics.gov.uk

The Pensions Regulator www.thepensionsregulator.gov.uk

Workplace Health Connect (for SMEs)www.workplacehealthconnect.co.uk

For information on Individuals Savings Accountswww.hmrc.gov.uk/leaflets/isa.htm

77

RESOURCES

Key bodiesAssociation of British Insurerswww.abi.org.uk

Association of Chartered Certified Accountantshttp://uk.accaglobal.com

Association of Insurance and Risk Managerswww.airmic.com

British Occupational Health Research Foundationwww.bohrf.org.uk

Chartered Institute of Personnel and Developmentwww.cipd.co.uk

Equality and Human Rights Commissionwww.equalityhumanrights.com

Employers Forum on Agewww.efa.org.uk

Institute of Directors (IoD)www.iod.com

National Association of Pension Fundswww.napf.co.uk

Personal Accounts Delivery Authoritywww.padeliveryauthority.org.uk

Pensions Ombudsman www.pensions-ombudsman.org.uk

The Pensions Advisory Servicewww.pensionsadvisoryservice.org.uk

The Pension Protection Fund www.pensionprotectionfund.org.uk

Trades Union Congresswww.tuc.org.uk

78

RESOURCES

CharitiesAge Concernwww.ageconcern.org.uk

Involve (employee involvement specialists)www.involve.org.uk

PRIME, a network that helps people aged over 50 set up in business orself-employmentwww.primeinitiative.org.uk

The Age and Employment Networkwww.taen.org.uk

The Methuselah Foundationwww.methuselahfoundation.org

AcknowledgementsAegon Scottish Equitablewww.aegonse.co.uk

Asdawww.asda.co.uk

B&Qwww.diy.com

BTwww.bt.com

Canada Lifewww.canadalife.co.uk

Cass Associateswww.cassassociates.co.uk

City Sightseeing Glasgowwww.citysightseeingglasgow.co.uk

Evershedswww.eversheds.com

79

RESOURCES

FirstGroupwww.firstgroup.com

Friends Providentwww.friendsprovident.co.uk

Gissingswww1.gissings.com

Hay Groupwww.haygroup.co.uk

Heritage Workswww.heritageworks.co.uk

JD Wetherspoonwww.jdwetherspoon.co.uk

Jelf Groupwww.jelfgroup.com

JLT Benefit Solutionswww.jltgroup.com

Landmark Systemswww.landmarksystems.co.uk

Legal & Generalwww.legalandgeneral.com

LIMRAwww.limra.com

Lovellswww.lovells.com

Manchester Metropolitan University Business Schoolwww.business.mmu.ac.uk

M&Swww.marksandspencer.com

Nabarro www.nabarro.com

80

RESOURCES

National Institute of Economic and Social Researchwww.niesr.ac.uk

Nationwidewww.nationwide.co.uk

Newcastle Business Schoolwww.newcastlebusinessschool.co.uk

Newham College of Further Educationwww.newham.ac.uk

Pearn Kandola, business psychology consultancywww.pearnkandola.com

Penna, HR consultancywww.penna.com

Pimlico Plumberswww.pimlicoplumbers.com

Plantronicswww.plantronics.com

Portus Consultingwww.portusconsulting.co.uk

Red ITwww.red-it.co.uk

Somerfieldwww.somerfieldgroup.co.uk

Standard Life Death of Retirement reportwww.standardlife.com/static/docs/death_of_retirement.pdf

Swiss Rewww.swissre.com

The Oxford Institute of Ageingwww.ageing.ox.ac.uk

The Urban Institutewww.urban.org

Towry Lawwww.towrylaw.com

EX

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EXTENDINGWORKING LIVES

How businesses can benefit from the

skills of an ageing workforce


£9.95



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

9 7 8 1 9 0 4 5 2 0 7 4 0

Supported by the Departmentfor Work and Pensions

1 Flannel rs 3/7/09 14:47 Page 1

extending working lives

Documents

thoseout of work

departmentfor work

pensions dwpthe department

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institute of directors

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age positiveage positive

aim of age positive