The Age Quandary Of U.K. Firms
In common with its European neighbors, British business is coming to terms with the prospect of a sharply depleted younger work force on which to draw from in coming years.
As the baby boom turns to bust, one-third of the U.K. population is aged 50 or older, compared with 15 percent in 1991. Future projections suggest that by 2022, there will be 1 million fewer people of working age who are under 50, while 3 million more will be 50 or older. The demographics are even more startling in countries such as Germany and Italy, whose birthrates have plunged.
For many British workers, financial necessity will keep them working longer in future years. The government recently confirmed that the age at which they become eligible for a state pension is to be gradually raised, from the current 65 to 68 by 2044.
In the meantime, ministers are none too subtly trying to encourage a change in attitude to employing older workers and backing their efforts with legislation.
As of October, U.K. companies can no longer make retirement below the age of 65 compulsory. Employees who wish to work on can request that the company extend their employment beyond 65.
Not that all companies have yet adjusted their policies to ensure compliance with the new rules. According to Water for Fish, which is owned by Aon Consulting, currently more than two in three job advertisements for human resources-related roles are likely to contravene the regulations by including references that could be perceived to screen out candidates because of their age.
Water for Fish has warned that companies that fail to review their recruitment selection process before October will be exposing themselves to discrimination claims.
The consultancy added that if a company's job advertisements are open to interpretations of age discrimination, it is also likely that its recruitment and selection policies and practices will not withstand scrutiny.
Recent statistics show that the median payout for successful claims is between about $11,825 and $14,300 (£6,200 and £7,500).
NECESSITY DRIVES CHANGE
Despite evidence that age discrimination persists, many British companies have been persuaded to revise their attitude toward employing older workers--albeit necessity has triggered the change.
According to the Chartered Institute of Personnel & Development, the London-based professional body for people involved in the management and development of other people, in the past year alone there has been a rise of 95,000 in the number of men aged 65 or older and women aged 60 or older in jobs. The CIPD's latest recruitment and retention survey, which canvassed 804 U.K. organizations, also found 70 percent of employers are taking on people aged 55 or older and 31 percent are hiring those who have reached pensionable age.
Companies cited a shortage of workers with specialist skills as the main reason for the more favorable attitude toward older workers. Nearly half of the firms surveyed found managerial and professional positions particularly difficult to fill, and 23 percent reported problems in recruiting suitable senior managers and directors. Less senior grades attracted fewer hiring problems.
The findings tally with evidence that British business continues to suffer an acute skills shortage, despite the Blair administration's promise when it took office in 1997 to make education a priority.
Sir Digby Jones, who has just stepped down after six years as director-general of the Confederation of British Industry, complained regularly during his tenure that around half of school graduates are still ill-equipped to enter the jobs market. An estimated 5 million of Britain's work force are fundamentally illiterate; more alarmingly, more than three times this figure lack basic number skills. The CBI reports that many businesses have to invest heavily in providing remedial education to employees. As the more basic manufacturing jobs are lost to lower-cost countries, this money could be better spent on more specialist skills training.
The sheer necessity created by skills shortages is therefore a major contributing factor to the U.K.'s ageing work force, with the others being longer life expectancy, lower birth rates, the greater aspirations of old people, more people taking up further education and legal changes. Delegates at this year's Association of Insurance and Risk Managers conference in June considered the implications of the shift in demographics.
"As with climate change, this is an issue that will gradually appear on the radar screen of many U.K. businesses," said Mike Crisp, a partner at broker Jardine Lloyd Thompson Group.
However, those companies that have anticipated the change and adopted a policy of hiring older workers are pleased with the results, he reported. Their experience has shown that older workers are generally no less productive than younger colleagues and demonstrate superior motivation, experience and interpersonal skills to offset their loss of speed, strength and memory. They are also less likely to take time off work--whether for genuine causes or feigning sickness to watch World Cup soccer matches.
Employers already converted to the cause include several in retail, such as Sainsbury's, a major supermarket chain with 420 workers aged 65 or older (including one aged 93) employed at its checkouts and customer-service desks.
While the incidence of workplace accidents for workers aged 50 or older compares favorably with younger employees, the U.K. Health and Safety Executive has found the recovery time for older employees to return to work is up to 40 percent longer. Health claims and sickness absence costs tend to be heavier.
"Firms have historically encouraged injured workers over a certain age to take early retirement, whereas their younger colleagues may receive rehabilitation," said Crisp. "This discrimination is going to be increasingly difficult, partly because staff may not want to take retirement, but also because businesses may need them to carry on working."
Business practices are likely to change as a result. More companies will review whether employees necessarily need to commute to the office or can work from home. The U.K. already has 3.1 million regular home-based workers, of whom 2.4 million are "teleworkers" using computers and telecommunications, against respective figures for 1997 of 2.3 million and 900,000.
The design of workplaces will need to be reconsidered as well. Companies must become more astute at detecting early signs of pain or injury, as older workers have a propensity to ignore them and continue working. Those employing home workers will also need to assess the risk exposures faced by these employees based away from the premises.
A DEMOGRAPHIC MISMATCH
British companies wishing to retain older workers also face the problem of a "geographic mismatch." Demographics reveal many older workers tend to live in or near coastal towns, rather than in major cities where many jobs are located. The trend could force businesses to adapt to a more remote-work-oriented environment, Crisp suggested.
"Many operate a team-based ethos, with their workers all under the one roof. It's a challenge yet to be faced as to whether you can retain this ethos when people are working remotely," he said.
Many firms will also need to adopt a more creative approach in how they hire older people, suggested Barbara Dahill, senior vice president of Marsh Ltd. A large proportion of jobs offered to the over-50s--such as supermarket greeters--are too mundane to attract those seeking something more intellectually challenging. Other incentives, such as sabbaticals, will also have to be considered.
Despite the issues created by fewer younger workers, Crisp said that British firms currently enjoy a short-term advantage over European rivals.
"In some sectors, labor costs are being driven down by the open economy, which has recently seen an influx of workers from other European countries," he said. "In time they may settle here, and this will drive unit costs back up again. But in the meantime they are below those of our competitors."
As workers in traditionally low-cost countries begin to agitate for improved pay rates, this trend could even offset the U.K.'s seemingly inexorable shift from a manufacturing-based to a service-based economy.
GRAHAM BUCK is a London-based writer covering European risk management issues.
October 1, 2006
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