Leveraging the Aging Workforce

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Canada’s workforce is rapidly aging. Mandatory retirement has been abolished. We associate aging with reduced productivity and commitment. We need to concern ourselves with succession planning. Human rights laws prohibit discrimination on the basis of age. How can managers cope with the complexity, challenges and opportunities of an aging workforce? P.A. Neena Gupta presented on these issues at HRPA 2014.

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  • Leveraging the Aging Workforce

    1. 1. Leveraging the Aging Workforce By: P.A. Neena Gupta neena.gupta@gowlings.com (519) 575.7501 Twitter: @cdn_employer
    2. 2. Old Paradigm • Retirement age first set at 70 in 1884 in Germany • U.S. Social Security set age 65 in 1935 • Life expectancy around 63 in 1930s • CPP set age 65 in 1965 •Average life expectancy about 68 • Retirement would be short and individuals would be frail and die within 3 years or so 2
    3. 3. Life Expectancy of a 65 year old today Male – 83.2 Female – 86.6 Average: 20.2 Effectively, we have 17 more years than was expected at the time Canada established age 65 as retirement. 3
    4. 4. Takeaway #1 We are all getting older! … It’s better than the alternative 4
    5. 5. Patterns of Work have changed • 80% of Americans over age 65 expect to work • high-end • People take pensions and then consult • Sometimes take pension and then forced to go to another workplace, where pension offsets lower wage • mid-end • Work part-time/flex-time/project work •low-end • Hourly service workers (McDonald’s) 5
    6. 6. Introduction Why should employers be adapting to the aging workforce? The demographics are clear: • The average age of the working age population is increasing • Participation rates of older workers have been climbing steadily • The average actual retirement age has risen to approximately 63 today and projected to be 66 6
    7. 7. Challenges • Wages increase with seniority • Productivity does not necessarily increase with seniority • Age-related physical and mental decline • Younger employees uncomfortable managing workers older than they are (perhaps even old enough to be a parent or grandparent!) • Difficult to have performance conversations with long-service, loyal and previously-productive employee 7
    8. 8. 8
    9. 9. Challenges • Skills need to be continuously upgraded • Older workers may be uncomfortable with new technologies and methodologies • Attitudinal barriers to training • Employers may be reluctant to train older workers on the theory that the return on investment will be less than investing in younger worker • Younger workers often trained in cuttingedge methods and technology 9
    10. 10. Myth number 1 “It’s not worth training/promoting older workers. They are going to retire anyway and leave us in the lurch. We really need to focus on younger hires … the next generation.” 10
    11. 11. Myth number 1 • Average length of service for worker 25 to 34? • 2.2 years • 3.2 years • 4.2 years • 5.2 years Answer: 3.2 years, Source: Bureau of Labor Statistics, U.S. Quoted by Jacqueline James, Huffpost, “When Older Workers are overlooked, It’s Employers who miss out” April 8, 2013 11
    12. 12. Workforce Loyalty • Assumption that not worth training or insisting on training for older workers not born out by facts • Younger workers far less loyal and more mobile • Workers 45 and up much more likely to remain with the firm for 5 years or more 12
    13. 13. Case Study number 1 • Monique Lebrun was a long-service employee at Radio-Canada in advertising sales; • Due to restructuring, demoted • Some employees not demoted, because RadioCanada favouring the “next generation.” • Lebrun applies for a promotion. Although qualified, she is told, “you have indicated your interest; we have decided to focus on the next generation.” 13
    14. 14. Case Study Number 1 • Employee was psychologically harassed • Demotion was discriminatory • Refusal to hire for promotion • Arbitrator Flynn reserved her decision on quantum • Judicial review sought and settled out of Court 14
    15. 15. Worried about employee quitting/retiring? • Create consistent practice of asking employees what their plans are • Ask about career aspirations and goals (2 to 5 years) • Ask about education and training wishes (2 to 5 years) • All employees, not just employees 55+ 15
    16. 16. Case Study no 2 • Una Clennon was the Manager, Family Birth Centre of the Toronto East General Hospital • Hired in May 2002 • 360 degree assessment identified significant performance issues • Many written complaints about her management style • The complaints/performance issue itself not discriminatory 16
    17. 17. Case Study No 2 • Performance review and 360 review presented to Clennon in late May 2004 • No specific follow up or coaching plan implemented, but there was some monitoring in spring/early summer 2004 • Hospital practice is to develop a detailed plan • Some vague discussions/questions regarding retirement • Terminated in July 2005 because of performance, but not for cause 17
    18. 18. Case Study 2 • Tribunal also found that employee would have been terminated anyway • evidence of psychiatric distress due to termination • $20,000 on top of normal severance package • Message: Hospital should have put her on the same PIP that a younger employee would have received 18
    19. 19. Case Study 2 • Employee was 59 years of age and eligible for generous HOOP pension • Arguably, Toronto East General Hospital reluctant to put her on PIP or coach her, because she was reaching end of career • Attitudinal barriers: • You can’t teach old dog new tricks • Why be unkind to experienced employee who is a hard worker? • Let employee retire in dignity 19
    20. 20. Moral of the story • Need to performance manage all employees • Don’t assume that older worker unable to be coached • Don’t assume that retirement will solve the issue of an older worker who is unproductive • Need to train your managers to have difficult conversations with all employees, including employees who are older than they are • DO NOT PULL PUNCHES JUST BECAUSE EMPLOYEE IS WELL-LIKED OR OLDER 20
    21. 21. Case Study 2 • Not discriminatory to consider demographics in workforce planning •Tribunal noted that Toronto East General Hospital kept list of employees 55 and up who are eligible for retirement •Developing pool of talent to promote/recruit for inevitable retirements 21
    22. 22. Mandatory Retirement is gone – now what do I do? 22
    23. 23. Introduction The legal rules have changed dramatically: • Mandatory retirement is no longer legal • These amendments ban any kind of discrimination against older workers • Human Rights Tribunals apply the ban broadly to: • partners in professional firms • contractors • This ban is subject to narrow exceptions: • Bona fide occupational requirement • Part of a bona fide pension or benefit plan 23
    24. 24. Voluntary Retirement Incentives • Appropriate to incentivize employees to leave • Can have broad based voluntary retirement incentive plans that are targeted by: • Age alone • Age and service factor • Department • Employer reserves the right to decline or “pick and choose” who gets a package 24
    25. 25. Case Study 3 • Kovacs, age 47, worked with ArcelorMittal (or predecessors) for 27 years and wants his early retirement plan • Does not meet any of the factors • He is not over age 50 • He does not have 30 years of service • Does not have blend (55 plus 15) or (52 plus 25) • Kovacs wants his buy-out 25
    26. 26. Voluntary retirement incentive • As long as the package does not violate the requirements of the Pension Benefits Act (PBA), an employer can create an early incentive plan. • Tribunal recognizes that plan provides “superior benefits to older, long-service employees; individuals who may experience greater difficulty in obtaining alternative employment if permanently laid off.” • Kovacs does not get his buy-out -- not old enough 26
    27. 27. Leveraging the Aging Workforce: What’s good for older workers is good for the entire workforce 27
    28. 28. Flexible Work Arrangements • The 40-hour plus week over 52 weeks a year does not work for many • Parents (mostly women) with younger children • Workers who wish to continue their education • Older workers who might need flexibility (health, leisure, grandchildren) • Employees dealing with elder-care issues 28
    29. 29. Training • Everyone’s training/education becomes obsolete • Depending on your workplace, a recent graduate’s education becomes obsolete between 2 to 5 years • Change of technology • Soft skills (management, harassment, coaching, OHS) • Skills not taught in school • Culture that emphasizes training avoids obsolescence of older workers 29
    30. 30. BMW Case Study • BMW aware of aging workforce on its assembly line • Reduced physical abilities/stamina • Poorer eyesight • Increased repetitive stress injury • Experimented with an older assembly line (average age 47) • Made 70 improvements (chairs, stretching areas, magnifying glasses, ergonomic tools) 30
    31. 31. Results of BMW Case Study • Errors/defects dropped to zero • Attendance and sickness reduced • Total cost: $50,000 • More than made up in reduced errors/absences • http://www.cbsnews.com/video/watch/?id=6837608n&t ag=related;photovideo 31
    32. 32. Compensation • Traditional compensation practices envisions normal increases with seniority • Experience/seniority becomes proxy for productivity • Depending on industry, this assumption may not be correct • Difficult to change in unionized environment, where seniority the keystone • In non-unionized workplace, can easily create bonus or productivity incentives 32
    33. 33. Bonus plans • Appropriate to have a fairly narrow variation on base • Create bonus criteria, where appropriate, to reward performance • Get away from age = productivity = higher wage • All employees in same category should be eligible: • Productivity • Training • Consider reducing “automatic” increases based on years of service 33
    34. 34. Leveraging An Aging Workforce “Life expectancy has gained 12 years during the last 40 years … those 12 additional years after age 65 present an extraordinary potential.” The Honourable Claude Castonguay, 2011 Canada’s Aging Workforce: A National Conference on Maximizing Employment Opportunities for Mature Workers 34
    35. 35. Further Reading Economic and Fiscal Implications of Canada’s Aging Population (Department of Finance, 2012) William B.P. Robson, Aging Populations and the Workforce: Challenges for Employers ( British-North America Committee) – acknowledged as source for slide number 8 graph. The National Seniors Council, Report on Labour Force Participation of Seniors and Near Seniors, and Intergenerational Relations (October 2011), Government of Canada 35
    36. 36. Thank You P.A. Neena Gupta Twitter: @cdn_employer Tel: (416) 862.5700 (519) 575.7501 Email: neena.gupta@gowlings.com DM#1285555 montréal ottawa toronto hamilton waterloo region calgary vancouver beijing moscow london

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