19 June 2014

Describing it as "helping business to wake up to older workers' untapped potential", the Department for Work and Pensions (DWP) has launched an action plan to help people to stay in the workplace.

Fuller working lives — a framework for action, available at http://bit.ly/1mRfY80, explains the benefits of working longer and describes how the Government intends to help people have fuller working lives.

"This is not simply about people working after State Pension age," the DWP explained, "though some individuals may want to and this may be right for them. We want to stop people leaving the labour market involuntarily in their 50s and early 60s."

Where's the evidence?

The Department has also published the statistical and other information which it believes backs up its arguments. This additional material can be found at http://bit.ly/1pbCgWq and shows that the number of people aged over 50 in the workforce is steadily rising: from 7.2 million in 2003 to 8.9 million in 2013.

However, one in six men and one in four women who have recently reached State Pension age have not worked since at least age 55.

Furthermore, over half of both men and women have already stopped working by the year before they reach State Pension age (SPa).

This matters to employers because of simple demographics: in the next 10 years there will be 700,000 fewer people aged between 16 and 49, but 3.7 million more people aged between 50 and SPa.

It matters to the people concerned because, of the 2.9 million people aged between 50 and SPa who are out of work, only 0.7 million see themselves as retired, yet 1.7 million think it is unlikely that they will ever work again.

Many of these are sick or disabled.

Early exit

Early departure from the labour force can have serious financial consequences for individuals with, in many cases substantial drop in immediate household income made worse by poorer pension prospects.

The DWP highlights, however, that the scale of early exit is also bad for employers.

"Reducing the outflow of older workers could help employers retain valuable skills and experience and reduce inefficiencies associated with filling vacancies and training new staff," it points out.

Older people are going to form an increasing proportion of the working-age population — 32% by 2020 compared to 26% now — so employing more older people will be crucial, the DWP report stresses.

The good news is that, despite some outdated stereotypes, there is no systematic evidence that older workers are less productive than younger workers.

Business reactions

That well-known employer of younger people, McDonald’s, has joined the argument with its Chief People Officer (Europe), David Fairhurst, arguing that changing demographics in the workplace mean that later-life workers are now the fastest growing age group in the labour market.

Yet despite the growing numbers of mature workers, their contribution to business and the wider economy often goes unsung, he continues.

"It might surprise people to learn that at McDonald’s we employ over 1000 people aged 60 and above," Mr Fairhurst points out. "These employees play an important role in our business and, as the research shows, they make a huge impact on customer satisfaction."

The Institute of Directors (IoD) has also reacted to the publication of the report, with Senior Policy Adviser Malcolm Small suggesting that the DWP report should serve as a wake-up call for employers, who will, he argues, need to rise to the challenge of managing a workforce aged in its 60s or even 70s.

And Alistair Cox, CEO of recruiting experts Hays, has added to the chorus of praise for older workers by reminding younger colleagues that, if they are willing to listen to the insights of the mature workers, their careers will benefit.

Celebrating the depth of experience and knowledge the mature workforce brings to world of work, he said: "Lose that knowledge and you lose a competitive advantage, which is why employers can do more to use older team members to train up younger employees, imparting the wisdom of decades of work to the new generation."

What's to be done?

The Government will:

  • bring forward the planned increase in State Pension age to 67

  • raise the age at which people can access Pension Credit and change the rules around access to benefits for mixed age couples to increase the incentives for the younger partner to stay in work

  • introduce the new State Pension in April 2016 so people can be clearer about what they need to save to supplement their State Pension

  • continue to engage with LEPs (Local Employment Partnerships) to ensure they understand the business case for fuller working life and discuss with them the potential for future work

  • increase flexibility in the way individuals can access their pension pots

  • carry out further work to understand any major financial (dis)incentives for older workers.

The DWP would like to hear from employers interested in helping it to take particular actions forward. They are invited to get in touch by emailing FULLER.WORKINGLIVES@DWP.GSI.GOV.UK.

From Paul Clarke, business writer for Croner