MORE COMPANIES will use phased retirement to retain valuable skills and knowledge while providing mature workers with an alternative to the all-or-nothing approach to retirement, according to a recent US report.
“Many companies focus on compensation issues when they weigh their options for offering phased retirement, but that isn’t the right place to start,” said Anna Rappaport and Mary Young, authors of the Conference Board report.
“Instead, employers should first define the talent challenges that phased retirement might help solve. Then they should evaluate which of the many options for phased retirement would be most effective. Figuring out the compensation and benefits should be the final step.”
Companies also need to decide if phased retirement will be offered exclusively to retirees or also to active employees of a certain age or tenure; if all retirees will be eligible or only selected ones; and if the timeframe of the program is temporary or indefinite.
If an organisation wants to promote phased retirement, a formal program is generally the best approach. Informal arrangements are a better choice when a company wants to offer phased retirement only to selected individuals, customise the arrangements, or experiment. In the long-term, if informal arrangements are offered to many employees, they become increasingly difficult to manage.
The first step in developing a phased retirement program is to examine the organisation’s vulnerability or risk exposure as a result of retirements. Initially, this may be a high-level scan that looks at workforce numbers company-wide. Further analysis needs to home in on selected, mission-critical jobs to assess strategic impacts and risk on a case-by-case basis.
At many colleges and universities, formal programs for phasing pre-retirement provide tenured professors with a fixed period of transition. As part of this buy-out agreement, faculty members receive partial pension and pay, along with additional incentive compensation.
In some cases, the faculty member continues his or her affiliation with the university after the end of the phased retirement program and may still teach an occasional course.
Once tenured faculty finally retire, some are appointed as emeritus professors. Emeriti often retain an office and remain part of the university community. They may participate in committees, conduct special research, or teach a course.
For some professional corporate staff who have a strong identity with a professional services firm or bank, something akin to university emeritus status might make sense, according to the report authors.
“Clearly, the best phased retirement plan is one that matches the organisation’s talent requirements to the employee’s or retiree’s needs and interests,”said Rappaport and Young.
“But a challenge worth the effort is to develop a system that makes consistently good matches for a variety of people with a variety of skills and experience. In the end, the viability of phased retirement ultimately depends on the nature of the work.”
Implementing a phased retirement program
There are a number of questions companies must ask themselves in setting up a phased retirement program, according to the Conference Board:
What portion of the workforce is already retirement-eligible or will soon be and which business units, functions, job levels, or jobs are most affected?
What specific talent gaps will result and how long would they last?
What kinds of firm-specific knowledge are at risk, such as an employee's relationship with key customers, knowledge of particular products, systems, etc.?
Are there groups of people with specialised knowledge who will be hard to replace, such as research scientists in pharmaceuticals or nurses in hospitals?
What is the retirement risk for mission-critical or strategically important jobs?
What is the retirement risk for individuals (such as the chief economist of a bank) who are publicly associated with a brand?