As life expectancy increases, people are likely to remain in work longer – which raises the likelihood of employees experiencing poor health. Employers need to take notice of the ageing workforce now in order to mitigate the risks this poses, writes Mark Witte.
It is inevitable that the ageing population will soon present a wide range of challenges to employers and employees alike. But even in these most testing of times we have yet to see significant evidence that this growing people risk issue has reached the forefront of employers’ minds.
Whilst the ongoing impact of the coronavirus pandemic quite understandably has forced other issues to the top of the business agenda, its lasting effect will provide further evidence that the ageing population is one demographic megatrend that employers will need to understand. Acting on it in the very near future is necessary for the benefit of their people and the performance of their business.
What is the data telling us?
In the UK, average life expectancy has increased from 75 to 81 over the past 30 years and projections are that this will continue to rise to over 85 by 2040, according to the United Nations. However, the impact of this trend is further magnified when some other closely linked statistics are also taken into consideration.
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Firstly, we have to take into account the impact of “healthy life years”. This is the period of our lives when we can be considered to be in a state of good health. Increased life expectancy raises the chance of extended periods of poor health in our later lives, especially if unhealthy lifestyle behaviours persist. In the UK, healthy life years currently average at around 65, meaning many of us will unfortunately be struggling with ill health for a number of years (possibly while still at work).
And then we need to consider that a guarantee of a known income for a retirement that starts from the age of 65, or even earlier, is an uncommon outcome for many. Increasingly people will need to work for longer and there is a greater likelihood that an extended period may well be spent in less than perfect health.
As individuals we have important decisions to make about how to mitigate the impact of poor health as we move into our later years and adequately fund retirement. The challenge for employers will be to understand the risks, impact and value of helping support their employees with these pressing issues beyond their historical obligations around pension and the duty of care.
In the UK, healthy life years currently average at around 65, meaning many of us will unfortunately be struggling with ill-health for a number of years.”
Why should employers take note?
Employers may already be faced with the costs and risks associated with their demographic trends whether they are aware of this inevitable driver of risk or not:
- Higher average ages among insured populations present an increased risk of claim, drive up underlying rating, and therefore premiums on benefits such as life assurance, income protection and medical cover
- Costs may be further impacted by increased actual claim numbers especially when little is being done to mitigate the impact of ageing on employees’ underlying state of health
- Beyond insurance matters, the impact will be felt by employers through increased employee absence, greater levels of presenteeism and loss of productivity
- Many employers are looking to reduce risk through health and safety, training and wellbeing programmes aimed at changing behaviours for the better – engaging effectively with an older demographic presents a very specific challenge
- Linking all of these opening points is the fact that for many the ageing process and the onset of ill-health is an inevitability. While preventative strategies should always have their place, there needs to be a recognition that, in many cases, supporting condition management will be the pressing priority
- Older employees, especially those in a state of poor health or with an underlying health condition may present a higher risk of workplace accidents. Data from the US shows that the average incurred workers compensation claim cost for workers aged 45 and over is 73% higher than workers younger than 45; and obese workers file twice as many workers compensation claims than non-obese workers with average claims cost being seven times higher
- Age is a protected characteristic under the Equality Act 2010, meaning employers have a clear legal responsibility to look after their older employees. It is worth noting that since the end of the employment tribunal fees regime, from 2018 we have seen claims up 90% year on year with legal experts advising employers to take more care to avoid litigation.
What can employers do?
Many employers may be daunted by the prospect of a growing, ageing workforce. While reversal of these demographic trends is beyond the control of employers, there is plenty of established and evolving best practice that will drive an improved outcome for their business, and an improved working experience for their employees.
Reflecting on the key risks as shown through your own data is important. Does your strategy really support the challenges specific to your business, such as an ageing workforce?”
Having a clear and defined health strategy in place is a fundamental requirement for any business, but does this specifically address the key demographic and health challenges of their organisaton? Employers must look to data to help provide real insights and drive good decisions. Reflecting on the key risks as shown through your own data is important. Does your strategy really support the challenges specific to your business, such as an ageing workforce?
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Such analysis will help employers to identify where they are already well placed and where they fall short. From here a strong business case can be built for investment in relevant and impactful measures, whether this is an increased focus on managing risk in the workplace, workplace adjustments, condition management or an increased focus on wellbeing and behavioural change.
As a professional services firm looking to help employers identify the real challenges impacting their business both now and in the future, we are continually looking to data and insight to help clients make the right decisions. There is a volume of data flagging the ageing population as a key current and growing future risk. And it is one that at present remains largely overlooked by employers and underserved by solutions. However, evolving markets and continuing innovation will present a growing range of opportunities for employers to meet this challenge. Full value will only be realised if investment can be effectively aligned to the specific requirements of their business.
