As the number of older workers in the UK increases, employers are having to rethink their approach to the flexible benefits they offer.
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- Employers are reviewing the way in which they offer and fund benefits for older workers.
- Benefits for older staff may include flexible working, sabbaticals and retirement planning seminars.
- Most organisations offer benefits to all employees and allow them to self-select according to their needs.
The traditional stereotype of an older worker tends to portray a relatively frail individual, possibly in poor health, no longer able to fulfil their role to the best of their ability and holding out for retirement. But the current reality could not be more different, thanks to improved standards of living and advances in healthcare.
As Andy Abernethy, marketing manager at Medicash, says: “What used to be the traditional view of what an older worker can do doesn’t fit any more. Older workers are going skydiving and generally rebelling against the stereotype of being old.”
So, how is this shift in older employees’ profi le, together with their ability to work beyond the state pension age following the removal of the default retirement age (DRA) in October 2011, changing employers’ approach to flexible benefits?
Financial education is one of the newest kids on the flexible benefits block, with a number of employers offering employees access to personal finance seminars and independent financial advice in an attempt to support their retirement planning.
Centrica, for example, offers its employees access to one-to-one fee-based advice with an independent financial adviser (IFA), ranging in cost from £150 for a basic session to £2,000 for a comprehensive wealth check, provided by Clarity Global.
Angus Jones, managing director at Clarity Global, says: “Flex provides the opportunity to think about [saving] every single time an employee makes their fl ex choices, rather than with 10 years to go [before retirement]. If the educational and advisory components are there, every time they make choices, they will make very, very good ones, rather than tick boxes, which a lot of people tend to do.”
Mike Emmott, public policy adviser at the Chartered Institute of Personnel and Development (CIPD), says a number of employers are also using outplacement support programmes to offer employees networking skills, job-hunting support and one-to-one counselling.
“The programmes are designed to keep up employees’ confi dence and make sure they don’t go off into a slough of despondency because they have very negative views about what retirement means,” he says.
Outside the retirement sphere, flexible working is an increasingly popular benefit for older workers, as is the ability to buy and sell holiday and, in some cases, sabbaticals, particularly in cases where organisations want to retain older workers for their expertise.
Healthcare is also a consideration for this category of employee. Paul Moulton, sales and client relationship director at Axa PPP Healthcare, says: “Organisations are starting to include [healthcare] products or services that perhaps are more relevant to the older worker. I am aware of some organisations where they make provision for informational support for conditions that are more typical for older people.”
Conditions more common among older staff may include diabetes and rheumatism.
But Matthew Gregson, managing consultant at Thomsons Online Benefits, says employers are focusing more on how they fund benefits for older workers, rather than on benefits selection. This is particularly the case when it comes to healthcare because of the relatively high cost of cover for older workers.
He explains: “Some organisations will still only fund benefits to age 65 or the state pension age, but what they will then do, for example, is pay a top-up into their pension plan. For example, if they stop funding additional life cover beyond, say, 68, to compensate for that loss, they will fund it into something else.”
Nationwide Building Society is an example of an organisation that has reviewed the cost of funding benefits for older workers.
But what do older workers actually want? Clare Sheridan, head of flexible benefits at Capita Employee Benefits, says: “There is definitely more of a focus from the older generation on total reward; not just salary, but good benefits, private medical insurance, good life assurance, an all-round package, whereas the younger generation is looking for as much cash as possible.”
However, the economic downturn has caused employees’ needs to become more aligned, says Sheridan. “If you look at a typical person in their later years, they have historically got the kids off their hands, their mortgage is low or gone, and they have lots of disposable income,” she says.
“They are more interested in health risk policies and access to a range of products and health and wellbeing policies. But because of the way the world has been in the last few years, people have remortgaged, people are sorting out mortgages for their kids, people are having kids later, the workforce is getting older and the retirement age is later. It’s all about value, so there is a lot of focus on discounts and generally providing value for money.”
The CIPD’s Emmott says a successful strategy for managing flexible benefits for older workers will balance employers’ needs with those of their workforce. Nick Throp, co-founder of communications firm Like Minds, advises employers to factor in employees’ attitudes to risk. “From employees’ perceptions and attitudes to their roles and their disposable income, people’s attitudes to risk are driving benefi ts decisions,” he says. “That is much more important than age and demographics.”
Sam West, client account and product manager for total reward statements and flexible benefi ts at Edenred, agrees that employers should avoid basing their flexible benefits strategy on age. He argues that any focus on a particular segment of a workforce, such as older employees, conflicts with flex’s raison d’être. “The whole point of a flex scheme is that it appeals to the mass audience,” he says. “There is something for everybody.”
Nevertheless, the issue of an ageing workforce will not go away, so employers need to devise a flexible benefi ts strategy to manage it. As Gregson says: “Employers are seeing there is a huge potential liability in retaining employees of a signifi cantly older age, potentially 70 plus, and therefore there is a big benefit to them in actually helping employees plan properly for retirement.”
Throp thinks the removal of the DRA and the demise of guaranteed retirement savings, due to the shift from defined benefit to defined contribution pension schemes will motivate employers to take action. “Not only are they not able to retire people in the same way, but people will not be able to afford to retire,” he says. “Once people see that start to become a reality for large numbers of their population, that’s when the penny really drops.”
CASE STUDY: NATIONWIDE BUILDING SOCIETY
Benefits cap for older workers does not fit yet
Nationwide Building Society has shelved plans to cap employee benefits for older workers after a review concluded that the cost of provision did not yet outweigh the value of the package to employees.
The internal review, which was led by HR director Robert Aldrich and an external law firm, was triggered by a rise in the cost of private medical insurance (PMI) claims being paid out over the last few years by the organisation’s healthcare trust, which is managed by Cigna HealthCare.
Aldrich says: “At the moment, we have the overall view that we want to treat everyone the same. Because of our inclusive approach, we really want to hold PMI open and be seen to be a very inclusive employer.”
The organisation also considered capping pension contributions to its defined contribution (DC) group personal pension scheme as part of the review.
Nationwide employees contribute 4% of salary to the scheme, which was launched by Friends Life in 2007 and has 6,500 active members. The organisation contributes 5% for employees with less than two years’ service and 9% for longer-serving staff.
Aldrich says: “We are not considering a cap on our pension arrangements at this time. Currently, members of our pension schemes can continue to make contributions and accrue benefits until age 75. This is in line with current legislation.”
Nationwide has 16,800 employees, of whom about 2,000 are aged 50 and above, 300 are aged 60 and above, and 10 are aged 70 and above. About 60% of its older staff work part-time or reduced hours across departments including treasury, planning, marketing, customer services and branches. About 60% of employees join the organisation aged 60 years and above.
In addition to PMI, which is available to all staff through Nationwide’s flexible benefits scheme and is fully funded for about 2,500 managers, its flex package also includes dental healthcare, the ability to sell up to two weeks’ holiday a year, childcare vouchers, retail vouchers, health assessments, and death-in-service worth four-times salary.
The organisation will continue to monitor the cost of benefi ts provision for older workers to assess the viability of retaining it for all employees. Aldrich says: “If, in years to come, we found we had a considerable number of people who wanted to stay and we had a large group of people, say, aged over 75, and that disproportionately really hit the rest of the benefits scheme, [for example] the cost of that was 20-times other people’s, I guess we would have to look at it and say ‘can we afford to do it?’ and therefore maybe put more age caps on things. But currently we don’t have suffi cient [numbers of older workers], so the issues haven’t arisen to say that we lose the benefit.”
Jane Vass, head of public policy, Age UK
Britain is an ageing society in which people will increasingly need to work longer than ever as a result of the tough financial climate and a rising state pension age. Yet far too many people aged 50 and over are locked out of the job market despite their skills and knowledge. This is often simply because they are unable to work in a way that enables them to balance their work and home responsibilities, which may include caring for a relative.
Something has to give if the UK is to truly unleash this wasted economic potential. That something is Britain’s overwhelmingly traditional and rigid approach to work. Britain’s businesses and employers must embrace flexible working in all its forms, from flexitime and working from home to allowing people to switch shifts or job-share if they are to make the most of the country’s growing army of older workers.
The law currently entitles parents with children under the age of 16, and those with caring responsibilities, to request flexible working arrangements. The government has publicly committed to extending this right to request to all employees, but has yet to announce any timeframe. Every worker should be able to do their job flexibly unless a business can justify otherwise.
Our report A means to many ends, published in September, showed that 38% of those in employment aged 50-plus worked flexibly in 2010, up from 30% in 2005. So the message is getting through, but slowly.
We also know that people in lower supervisory and routine jobs are less likely to be granted flexible working than those in management or professional roles. Carers are also less routinely able to work flexibly than staff returning from maternity leave.
Perhaps even more of a wake-up call is the devastating impact of being unable to work flexibly. Some 25% of carers under the age of 70 report that caring responsibilities affected their work and, of these, 39% ended up leaving employment altogether.
A more versatile workplace is the obvious way to keep these people in jobs and harness their talent, not to mention economic contribution. How organisations choose to implement flexible working, either informally or formally, will depend on a range of factors, including business size and set-up. What is in little doubt is that it is a way of work that no forward-thinking employer can afford to overlook.