Default retirement age removal raises four key HR issues

The removal of the default retirement age (DRA) means employers will face new issues over four key areas covering redundancies, staff motivation, reward and employee benefits, says Mercer.

Older, longer-serving employees remaining in the workforce longer will affect the flow of talent through the workforce and the availability of senior roles will be less frequent in the short to medium term.

Managing the changes in workforce flows and ensuring the best talent is used will demand more of a focus on talent management programmes and succession planning processes, says the consultancy.
 Wage bills will also increase because older employees, who are typically paid more remain in their post longer. While currently the wages of new hires and internal promotions can be funded by the predictable retirement of older and better paid employees, without a DRA, this source of funding will become uncertain and cost control will become more difficult as resources are stretched.
Changing demographics in the workforce could impact funding and liabilities in pension plans as well as drive changes in the design of both post- and pre-retirement benefits, including group life cover and health insurance and/or well-being plans and employers will need to address the impact of longer working lives on the funding and liabilities of pension plans and benefit arrangements says Chris Johnson, head of the human capital business at Mercer.

Johnson also says that employers will need to refine their performance management processes if employees can decide how long they stay in the workforce subject to there being a job, and satisfactory performance. This may mean that they will become more likely to implement redundancy programmes.
Johnson says: “Not everyone is living that much longer, and healthy life expectancy is still something that is not well understood. Longer working lives may be better for those who have comfortable white collar jobs; less so for those with blue collar or more routine jobs. In addition, while large companies should find it easy to implement required performance management processes, it will not be as simple for smaller employers.”