Preparing for the aging workforce

No mandatory retirement and an aging population means employers must adapt to having older workers

Laura Williams

Mandatory retirement has pretty much been abolished in all Canadian jurisdictions, which means employees can essentially remain on the job for as long as they want. If the job isn’t getting done, employers have to be careful not to be seen as using age as a factor in termination — in fact, they may find they have to accommodate workers due to their age.

Accommodation is just one thing that employers may find a necessity, as not only are workers free from being forced out at age 65, but a greater proportion of workers — along with the population as a whole — is older, thanks to the graying of the baby boom generation. Some employers might be preparing themselves for this new demographic reality, but others still have some work to do.

Most Canadian organizations are woefully unprepared for an upcoming shift in workplace demographics. Specifically, that is the bulge of baby boomers set to change workplace dynamics before sparking an eventual labour shortage, not to mention a knowledge and skills gap, as this greying cohort eventually exits the workforce.

Why? Some sources have estimated that more than 40 per cent of the Canadian workforce is currently comprised of baby boomers — individuals born between 1946 and 1964 — the first wave of which has just recently reached retirement age. According to Statistics Canada, one in three Canadians older than age 55 was still working in 2010. By 2021, nearly one in four workers will be aged 55 or older.

Unlike their parents, the boomers are taking a different approach to their golden years for varying reasons — the most significant being the outlawing of mandatory retirement across virtually all Canadian jurisdictions, unless there is a bona fide occupational reason for requiring an exit based on age. With no mandatory retirement dictating the end of the employment relationship, many older employees are working (and will work much longer) than their parents, with statistics showing that about 44 per cent will re-enter the labour market within 10 years of retirement. Some will decide to work longer or return to work simply due to boredom — today’s retirees are living longer, enjoy better healthcare and are more active than their forebears, and many prefer to keep participating in the workforce to maintain a sense of contribution, purpose, connection and camaraderie with their peers.

Others will work longer or return to the workforce because they have no choice. According to a 2013 global retirement survey by London-based bank HSBC, 55 per cent of those at or near retirement age revealed that their financial preparations were inadequate, while 23 per cent said they were completely financially unprepared for retirement. HSBC estimates that retirees need approximately 81 per cent of their current income to live comfortably during retirement. Still, the survey found that one in six people (17 per cent) who are not yet fully retired will never have adequate savings to stop working in their golden years.

This demographic wave of older workers will have profound effects on organizations of all sizes and across industries. Employers will be forced to manage several key challenges related to an aging workforce, including overcoming ageist stereotypes that can create exposures to human rights and constructive dismissal allegations; managing the transition of older workers from employment to voluntary retirement; understanding that development, talent management and succession planning are critical; and managing the issues that exist within multigenerational workplace environments. Then, when the boomers eventually do leave the workforce, organizations will need to overcome an acute labour shortage and a skills and knowledge gap as they seek to maintain business continuity.

Unlike most HR challenges, overcoming the issues that these demographic obstacles present cannot be avoided. That said, employers can turn the issues and potential liabilities related to a workplace full of aging employees to their advantage — and even make their organizations more efficient, innovative, productive and profitable than ever. While they will have to overcome several key hurdles, a strategic and proactive approach to HR law and policy design can turn this demographic dilemma into opportunity. Here are three best practices for managing through aging workforce issues:

Beware of ageist assumptions. A major challenge for many employers when dealing with new demographic realities is learning how to properly performance-manage older workers. When older workers face challenges in performing their responsibilities, many employers assume that it is due to their age. What they often overlook is the fact that the older worker may be disengaging from the workplace because their value and institutional knowledge is being under-recognized in favour of the newer generations in the workplace, which may be viewed as bringing new and current skills. That could be the case, particularly for roles that have physical requirements which older workers — who may be “slowing down” — are unable to perform as they had in earlier years. However, employers have to be careful to manage the performance of every employee in the same way. This includes approaching requests for accommodation of disabilities consistently across the workplace, regardless of the employee’s age. Employers can reduce exposures to allegations related to discriminatory treatment of older workers by setting out clear policies and expectations for all staff — then consistently applying them without exception. Be prepared to conduct regular performance evaluation sessions, and make sure the criteria used to assess employee performance is consistent and based on objective job criteria. Stay focused on the fact that what really matters is an employee’s skills and ability to perform the job.

Also, it’s increasingly important to ensure the organization has a human rights policy including mechanisms to resolve any complaints of differential treatment due to age. It’s equally critical to ensure that employment agreements with valid and enforceable termination clauses are in place to minimize the organization’s financial liability in situations which involve terminating the employment of workers who are older and may have long service with the company.

Be intentional about workforce planning and succession. At some point, aging employees will have to retire or move on, which means organizations will need to strategically prepare for that impending labour shortage. As such, workforce and succession planning are both necessary and legitimate to ensure the transfer of skills, as well as the meeting of all functional requirements. But organizations should be sure never to discount older employees from consideration for promotion or development opportunities without clear justification — lest they risk a costly human rights challenge or age-related discrimination lawsuit. To make matters more complicated, age is considered a significant barrier to finding employment, which increases the notice period an organization would be required to provide to a terminated older worker who does not have his or her termination entitlement dictated in an enforceable employment agreement.

When conducting workforce and succession planning, it is reasonable and legally permissible to ask an older worker about his retirement plans, as this is recognized as being necessary for employers to ensure ongoing operational needs are met. However, these inquiries should not be made in a manner that places pressure on that employee to step down from his or her role. To stay onside of the law, employers should have this discussion as a matter of course with all employees, recognizing that younger employees may have career plans that include an exit from the organization that could also create a skills gap. Also, be careful to not have discussions regarding retirement plans in the context of performance-feedback sessions or when meting out discipline, as this could suggest a taint of age-related discrimination.

Leverage multigenerational opportunities. There are currently four generations working together across Canadian workplaces — the Silent Generation, boomers, Gen X and Gen Y, with Generation Z on the cusp of entering the workforce. The presence of multiple generations in the workplace, with different work styles, values, expectations and motivations, can cause challenges for employers and place a strain on morale. That is, if employers don’t engage strategies to recognize these variances and leverage the opportunities that they create. These include opportunities to preserve and pass on the organization’s vision and strengths through mentorship of younger workers by their older peers. This also serves to communicate appreciation and recognize the value of older workers, which is key to keeping them engaged. Strategically partnering members from different generations on projects can also enrich and maximize innovation in the workplace.

Laura Williams is the founder and principal of Williams HR Law, a human resources law firm in Markham, Ont., serving employers exclusively. She can be reached at (905) 205-0496 or [email protected]

Latest stories