Human Capital & Careers

Paring HR Costs, Preserving Expertise

Phased retirement programs offer a little something to both employers and employees.
Stephen TaubMarch 25, 2004

Companies looking to reduce their labor costs and older employees looking to reduce their hours seem to have an interest in common. Likewise, companies that hope to preserve the expertise of their most experienced workers share an interest with employees who aren’t ready to stop working altogether.

A new study by Watson Wyatt, however, found that many employers have yet to establish formal or informal arrangements — such as shorter work weeks, flexible hours, or the opportunity to try something new — that would encourage older workers to delay full retirement.

The study, which surveyed 1,000 workers and retirees at or near retirement age, found that about one-third of this group would work longer than they had otherwise planned if their employer offered a phased retirement program.

Fully 57 percent of workers who are currently in phased retirement entered that arrangement voluntarily, to have more leisure time, the study found. In fact, 42 percent said their primary reason for choosing phased retirement instead of full retirement was because they enjoyed their work. Just 28 percent said they needed the money — that is, that they couldn’t afford to retire outright.

Furthermore, 32 percent of workers in phased arrangements had actually retired completely, then re-entered the workforce after becoming disillusioned with retirement; 40 percent, however, said they returned to work because they needed the money.

Among employees currently in a phased retirement plan, 80 percent work flexible hours, 79 percent work part-time, and 67 percent have less responsibility in their current job compared with their “career” job.

Watson Wyatt also pointed out that even an informal phased retirement program can go a long way toward retaining experienced workers.

For example, among workers who stayed on at their career employer, but in a phased retirement arrangement, 82 percent were offered a part-time schedule, and 71 percent were offered a more flexible schedule.

On the other hand, among workers who left their career employer to accept a phased retirement arrangement with another employer, only 16 percent would have been offered a part-time schedule, and only 20 percent would have been offered a more flexible schedule.