Profound changes to the demographic of working people are taking place. Employers should not ignore this and must ask themselves how they will adapt and provide for an ageing workforce.
The Office for National Statistics predicts that there will be 3.7 million more workers aged between 50 and state pension age over the next decade. During the same period, there will be 700,000 fewer working people aged between 16 and 41.
Training and development
A recent survey of small to medium-sized businesses showed that most employers agreed that training and skills development is critical in ensuring that mature employees can work effectively up to the age of 60 and beyond. They also agreed that such training represented a good return on investment because those employees are more likely to remain engaged with the business.
When it comes to training and development, employers should always comply with their legal obligations on age and disability under The Equality Act 2010. They should offer training and development to their whole workforce rather than targeting a particular age group. ACAS guidance states that an employer should avoid stereotypes and not make assumptions about an individual’s needs based on their age or length of experience.
An Age UK report in 2013 said that, for the first time, the number of people aged 65 and over who had used the internet had overtaken those who had never used it. Stereotyping older workers as not being “tech-savvy” for example may be factually incorrect as well as being discriminatory.
An employer might come across resistance to training from older employees, who may think there is little point in engaging with training and development so close to retirement. ACAS guidance confirms that employees do not have to undertake further training, but that if their performance is below what an employer would expect of them, then the employer can insist that they undertake it.
An employer does not have to tolerate an employee who is not performing satisfactorily. The key here is that where there is an underperforming employee, an employer should challenge the behaviour and not be afraid of going down the disciplinary route, while at all times treating employees consistently.
Some businesses are offering pre-retirement training, where they inform employees of things they may need to think about in the run up to retirement, such as financial planning, benefits and pensions or maintaining a healthy lifestyle. An employer needs to be careful not to only target people they consider are close to retirement.
Health care and age at work
According to the Department for Work and Pension’s “Fuller Working Lives” document, half the people aged between 50 and state pension age have a long term health condition. The Mental Health Foundation says that depression affects one in five older people and that 70% of new cases of depression in this age group are related to poor physical health.
Health and wellbeing initiatives from employers will generally benefit a workforce, but on the basis of the statistics above, these initiatives will have a significant impact on older workers. It is important to note that when we are talking about health and wellbeing we are not just talking about the health and wellbeing of the employee themselves, as they might also be caring for elderly relatives, for example. According to the TUC study “Age Immaterial”, 49% of women over the age of 50 are caring for a parent, while 39% are caring for a child. With changing demographics, it is more common to see “sandwich” carers, who care for a parent as well as a child or grandchild.
The obvious burden for employers providing healthcare benefits to employees is the cost involved, but lost working days, staff turnover and lower productivity cost the UK economy up to £26 billion each year. This equates to roughly £1,000 per employee. This seems to be a good statistic to use to get the attention of a sceptical finance director. BT reported in 2012 that its mental wellbeing strategy had led to a reduction of 30% in mental-health-related sickness absence.
If you are an employer planning to positively engage with the health and wellbeing of your workforce, make sure you do so in a non-discriminatory manner. The initiative should be rolled out across the entire workforce and not targeted at particular age groups.
Age discrimination in goods and services
The Equality Act prohibits discrimination by service providers as well as by employers. For example, if an employee is sent on a training course and they experience discrimination by a trainer, this may give rise to a course of action against the training provider. Alternatively, if the individual is not allowed to go on that course, this may give rise to a claim against the employer for failing to give an employee access to that service. This raises the key question of who is responsible for any alleged discrimination.
After the default retirement age was abolished, employers feared a wave of age discrimination claims if they were unable to provide health insurance, life insurance and income protection benefits for employees aged over 65, either because such benefits were not available or because they were particularly costly. The Government listened to these concerns and there is an exemption in the Equality Act which states that it is not discriminatory for an employer to fail to provide insurance services with a third party in respect of employees who reach or who are over the age of 65 or state pension age.
This hard-edged exemption does not apply if the employer is itself in business as an insurer. Employers who self-insure will need to show that the curtailment of cover at age 65, or state pension age if higher, is justified. The hard edged exemption saves an employer the difficulties of attempting to justify their position on the grounds of cost (which is still legally problematic).
Pension, retirement income, death benefits and age at work
A survey from financial website This Is Money found that those closest to retirement manage their finances most conservatively, but once they retire, they tend to be less conservative with their spending.
Many employers predict they will play a greater role in providing for and assisting with the retirement planning of their workforce. A recent survey from Pensions Insight found that 38% of employers felt a very high responsibility for the financial wellbeing of their workforce and 71% will be making changes to the retirement options for their defined contribution arrangements.
This year’s Budget “controversially” announced that from April 2015, individuals over the age of 55 will be able to withdraw their entire defined contribution pension pot. There are some interesting parallels to be made with Australia, where a similarly flexible system was introduced 20 years ago. The Murray survey in Australia showed that half of those surveyed took their entire pension in a cash lump sum and a quarter of those had actually spent it all by the age of 70. So, in Australia they seem to be potentially going in the opposite direction to the UK, although there are discussions to introduce caps on the amount individuals are allowed to take out of arrangements.
Businesses (for example, Yorkshire Water) are finding that employees who previously had defined benefit pension provisions but have switched to defined contribution have to stay in the workplace longer to effectively make up “the savings gap”. Employers in the UK face an ever increasing “defined contribution workforce” that is going to need to work flexibly to care for their parents, but will also have the financial responsibility for children and grandchildren.
Employers are facing new challenges as a result of an ageing workforce, flexible working rights and benefit provision. However, an ageing workforce brings with it new opportunities. So long as an employer ensures it does not act in a discriminatory manner, providing training and development, healthcare and wellbeing initiatives and reviewing benefits provision for workers will benefit older workers, the workforce and the economy as a whole.
View the webinar “How Will you Provide for an Ageing Workforce?” from Wragge Lawrence Graham & Co LLP.