Part-Time Retirement Programs Are on the Rise
Mar 17, 2022
Plenty of older workers have wished for something between full-bore work and retirement. Now, more companies seem to be giving them what they want.
Phased retirement programs—which allow workers nearing retirement age to cut back on their hours while keeping some pay and benefits—are growing in popularity. Human-resource executives say the pandemic has opened bosses to flexible work arrangements, while the fierce hiring market and higher-than-expected rate of retirements have motivated managers to find ways to retain older workers with key skills.
In a forthcoming survey of 1,736 HR executives world-wide from consultant Mercer LLC, about 38% say they offer phased retirement, more than double the 17.2% that did so before the pandemic.
In the U.S. 23% of employers had these arrangements in 2021, up from 16% in 2016, according to the Society for Human Resources Management. A growing subset—8%, up from 6% in 2019—have introduced formal programs, which generally target older workers who meet certain criteria. Another 15% offer the option on an informal or ad hoc basis, frequently to employees in hard-to-fill roles.
Phased retirement is “a way to slow the brain drain and manage talent shortages” at a time when the U.S. workforce is aging, said Andrés Tapia, a senior partner at consulting firm Korn Ferry. He encourages clients to add the programs to “find ways to leverage rather than lose that voice of experience.”
Some workers have longed for such arrangements, which financial advisers say can provide financial and psychological benefits compared with going from full-time work to retirement. Among companies adopting phased retirement programs, figuring out how to provide benefits and set criteria for participation can be a sticking point in some HR suites, said Yvonne Sonsino, a partner at Mercer.
Potential legal and financial complications loom, consultants say, not to mention the fact that some companies would like their longest-tenured people to move on.
Companies adding or considering formal phased retirement programs include SAP North America, Owens Corning and Haynes International Inc., a Kokomo, Ind.-based maker of high-temperature alloys.
The pandemic accelerated the pace of baby boomer retirements and created challenges for employers. From February 2020 through November 2021, up to 2.6 million more people retired than were expected to, given pre-pandemic trends, according to Federal Reserve Bank of St. Louis senior economist Miguel Faria-e-Castro.
Universities have long offered phased retirement programs to tenured professors, in part to make room for younger faculty. Others with the benefit include the federal government, some law and accounting firms, and companies including Abbott Laboratories.
Many of the new programs involve employees helping train workers who will eventually take their place.
Kathy Bird, who leads employee communications for SAP North America, started considering retirement last summer when she and her husband moved from Pennsylvania to coastal North Carolina. She imagined devoting more time to volunteering and golf but said she felt unready to leave the job she loves.
Ms. Bird, now 66 years old, approached her manager. They discussed her cutting back to a part-time schedule and training a colleague to take on more of her duties. Ms. Bird will begin working 20 hours a week starting in July and will keep all of her benefits during the transition. She and her manager haven’t yet determined how her pay will be adjusted to reflect her reduced schedule.
“For me, it’s kind of the best of both worlds,” said Ms. Bird.
Her manager, Jackie Montesinos-Suarez, agrees. “Her giving me 20 hours a week, from a business continuity standpoint as a manager, that’s a no-brainer.”
SAP is working on formalizing a phased retirement program. Dan Healy, an HR executive there, noted that plans are in the works, and that the company has seen increased interest from workers close to retirement.
Owens Corning, a Toledo, Ohio-based maker of building and construction materials, launched a phased retirement program in 2020. Salaried employees age 55 or older with at least five years at the company can ask to be considered for the program, which allows part-time work and pay with full-time benefits, including health insurance, often for three to 12 months.
With a projected wave of retirements, “we were concerned we were going to lose a lot of institutional knowledge and intellectual capital,” said Paula Russell, chief human resource officer.
The program gives the company time to recruit and train a successor before the employee in the job retires, she said.
Managers typically approve phased retirement for workers with hard-to-replace skills; participants have included engineers, legal specialists and research and development staff, Ms. Russell said. Employees often retain some responsibilities in addition to helping train a successor, she said.
Thirty employees have participated so far. Eight are in the program now, with more in discussions.
SOURCE: The Wall Street Journal (WSJ)