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September 19, 2006 Highlights Our second "Changing Workforce" advisory examines how mandatory retirement fits into the overall workforce picture, and how employers faced with elimination of mandatory retirement can adapt to the change.
Hewitt
The Hewitt Research Advisory is a regular Hewitt newsletter designed to provide a detailed overview of specific legislative and regulatory developments in Canada relating to human resources.
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Copyright © 2006 Hewitt Associates |
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The Changing Workforce and Mandatory Retirement Canada’s aging workforce and the demographic bulge of the Baby Boomers (those age 40-60, roughly) mean that labour shortages in the coming years are a certainty for most employers (see The Changing Workforce: Challenge and Opportunity, a Hewitt Research Advisory published June 22, 2006). In fact, a recent survey conducted by Hewitt Associates in Canada – Attracting and Retaining the New Workforce, 2006 - found that three-quarters of the 232 employers who responded were already having problems attracting or retaining workers. Nearly half - 44 per cent - said they are having trouble with both recruitment and retention. Right now, the problem is worst in Alberta and Québec, and least serious in Ontario; but since Veterans (employees over age 60) and Baby Boomers make up more than half of the Canadian workforce, the labour shortage is expected to pinch much harder in all jurisdictions before getting better. Retirement Rationale Given this larger context of demographic changes and labour shortages, it is clear that Canada’s employers need to change the cultural mindset of early retirement, if they can. But what about mandatory retirement, the practice of forcing people out at age 65 (or earlier, in some cases) whether they want to quit working or not? How does that practice fit into the workforce shifts that are on the horizon? The main justifications for mandatory retirement have been seen as: opening up job opportunities for younger workers; declining physical abilities and job performance of older workers; and employers’ need to quantify and limit costs for pension and benefits plans. But these objectives are no longer as valid as they used to be. The first reason will become irrelevant as the labour shortage grows and there aren’t enough younger workers to go around. The second is suspect for many jobs, because a knowledge-based economy is less physically demanding and because life expectancies, and corresponding good health, have increased dramatically since the time when mandatory retirement was first adopted. The last reason is only somewhat valid, given the trend away from Defined Benefit (DB) pension plans and toward Defined Contribution (DC) plans, plus the fact that DB plans can in fact be cost effective, because the obligation to pay benefits is deferred for the number of years that an employee continues to work. |
