How voluntary exits can help employers cut costs while protecting workers
The federal government is moving ahead with a major early retirement initiative for public servants, sending information about a voluntary early retirement program to nearly 70,000 employees as part of a broader plan to shrink the core public service over the next few years.
The measure is tied to the government’s objective of cutting jobs largely through attrition rather than involuntary job cuts, with a one-year program “expected to launch in January.”
Anil Verma, professor emeritus of organizational behaviour and human resource management at the Rotman School of Management, explains that Canadian employers have long turned to early retirement programs as an alternative to layoffs, and is generally considered a “more humane” approach: “This is a voluntary program, and hence it's considered superior because each person can see how it fits their own priorities and they can act accordingly.”
Age discrimination and financial concerns
When employers look to target older workers with early retirement options, the risk of perceived age discrimination may be front of mind – Verma distinguishes sharply between voluntary and forced approaches when it comes to these concerns, pointing out that the key is ensuring that the offers are genuinely voluntary.
“There is a very non-discriminatory reason for making this offer to older workers, because they have more accumulated savings and they can get a higher severance,” Verma says.
“So, in some ways, the transition is easier for them.”
Verma does, however acknowledge that older workers can also face challenges around accessing resources post-retirement, compared to younger employees who have options to return to school or change careers.
Verma cautions that while a lump-sum payment or enhanced pension can be attractive, employees may underestimate the long-term implications of people leaving work early, particularly in their 50s. He suggests employers that rely on voluntary early retirement as a workforce tool should consider what support they provide to help workers make informed decisions. “People who make the decision in haste end up often regretting it,” he says.
The promise of the financial gain of an early retirement payout may tempt some to take the offer, he stresses – and this is where employers should step in: “Employers should consider providing some out-counseling services,” he says, suggesting that a mix of personal, financial and career counselling can help employees understand whether early retirement truly is truly the correct path for them.
Unionized workplaces, equity and severance benchmarks
For unionized employers, Verma draws a distinction between voluntary and involuntary workforce reductions, but says equity and compliance with established norms are central even when offering voluntary options.
In the federal situation, the Public Service Alliance of Canada (PSAC) has pointed members to provisions of the Public Service Superannuation Act, noting that the Treasury Board can waive the pension reduction that normally applies to early retirement in certain circumstances.
Verma notes that some mass layoff or downsizing situations still end up in litigation or union grievances over the adequacy of packages, even when employers meet or exceed baseline expectations: “Your constraints would be that you have to make the same offer to everyone, you cannot discriminate … definitely you must practice equity across the ranks and level of employment.”
Managing who can leave and protecting critical knowledge
Beyond legal risk, employers must consider what happens to institutional knowledge when a wave of experienced staff exits in a short period.
The federal government has signalled intent to control which roles are eligible and which applications are accepted – the Treasury Board has said the program will be offered only within parameters it sets, with acceptance not guaranteed and parameters designed to protect essential services and continuity.
Verma notes that many private sector employers already build safeguards into their early retirement offers to limit unplanned knowledge loss.
“Sometimes these offers can be made to only certain departments, instead of company-wide,” he says.
“For example, in the private sector it's easier to replace a salesman than to replace a high-tech person who is working on a project for the last eight months and is halfway through the project.”
