3 ways the ageing workforce affects pay strategies
With today’s ageing population, it is time to devise innovative solutions to address the financial challenges of having an older workforce. In its 2018 reward management survey, the CIPD found that 52 per cent of respondents predicted that the ageing population would impact their policies and processes in the next five years. How exactly will this affect pay strategy and reward?
With employees working for longer, businesses will have to provide older workers with salaries for extended periods of time. This will affect pay strategy across many industries with businesses having to spend more to support older workforces while simultaneously attracting new workers. This will affect starting salaries as businesses may not have the funding to continue providing attractive starting salaries for graduates and individuals entering the workforce.
With the age of retirement increasing to 66 by 2020, employers are having to rethink their processes. Less employees will work full-time up to retirement, so offering older generations flexible working and part-time work until they can officially retire allows employers to spend less on their older workforces. This means they can continue to offer generous and attractive starting salaries whilst maintaining expertise and knowledge within the company.
With an ageing workforce and auto-enrolment pensions, more employees than ever are saving for their future. With increased minimum contributions, businesses are expected to provide more money to their employees’ pension pots. This will affect pay strategy as companies have increased outgoings.
One of the downsides of this legislation is the false sense of security it has created, with many employees believing that pension scheme membership alone will automatically supply them with an adequate pension pot at retirement. To combat this, it is possible that employers pay more and make larger contributions. However, it may also be beneficial for businesses to educate staff about their finances and future. This can be achieved through financial education surrounding pensions.
With age comes the increase of the possibility of illness. This is due to the fact older individuals become more susceptible to disease and disability. This is likely to affect pay strategy as employers will need to assess their policies around sick pay and other health employee benefits.
Although not all workers will experience health issues, early intervention services such as private medical insurance, employee assistance programmes and health screenings can support employees and get them back to full health quicker, meaning they can return to work.
Employers, however, may question the cost of increased benefits. In fact, a study by Economist Intelligence Unit found that 43 per cent of employers expect higher costs of benefits as a result of an ageing workforce.
Yet, benefits such as health screenings are low-cost and highly beneficial in providing diagnosis of long-term health problems. This can prevent more serious and prolonged problems within employees and support them in returning to work. This therefore decreases the amount of sick pay the business may have to pay.
Pay strategies will change
With ageing workforces, it is likely that pay strategies will continue to develop so that businesses can support the needs of their employees. This is because there are many factors to consider with an ageing workforce.
When developing business strategies, it is vital that pay and benefits work alongside each other to ensure that employees are happy, motivated and productive.
This article is provided by Busy Bees Benefits.
Read the next article
- Coronavirus actions
- Benefits Technology
- Bonus & Pay
- Business mobility
- Company Cars
- Employee Engagement
- Employee Share Plans
- Financial Wellness
- Flexible Benefits
- For SME employers
- Future Predictions
- Group Risk Insurance
- Health & Wellbeing Sponsored by Aviva
- International Benefits Sponsored by Zurich
- Responsible Reward
- Reward/benefits strategy
- Staff Motivation
- Tax Efficient Benefits
- Total Reward
- Voluntary Benefits
- Workplace Pensions
- Workforce Demographics
- Research reports
- REBA news round-up
- REBA professional members
- REBA news
- REBA training
Sign up for REBA Professional Membership and join our community
Professional Membership benefits include receiving the REBA regular email alert, gaining access to free research and free opportunities to attend specialist conferences.
Professional Membership is currently complimentary for qualifying reward and benefits practitioners.Join REBA today