Employees retiring later may be affecting younger workers’ career paths. Especially in the higher education market, professors tend to stay longer than what is traditionally considered normal retirement age.
However, Michael O’Malley, Ph.D., managing director at Pearl Meyer, a consultancy to executives and boards, and a lecturer in Yale University’s School of Medicine, based in New York City, says overall, professors staying at universities longer is not disrupting faculty pay and career movement for most universities. “Those things are pretty regulated by universities—faculty get promoted at certain times,” he says. “However, it does affect how much hiring gets done.”
But, colleges and universities have come up with some innovative solutions for helping senior faculty retire that could be lessons for other types of employers.
First, it’s important to understand the motivations behind employees not retiring. In the corporate world, while some hang on because they enjoy working or want a sense of purpose, others may be delaying retirement for financial reasons. This could be true with senior faculty at higher education institutions, but according to O’Malley, it’s not likely. “[Employer matches in 403(b)s for universities is usually high, particularly for faculty,” he says. “I wouldn’t think money is an issue. Their savings should be sufficient if they’ve been contributing all along.”
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To college and university faculty, their position is not a job, it’s their identity, explains Karen Hutcheson, partner in the Career division with Mercer in Philadelphia, and the lead for higher education consulting. “Many have not only spent the bulk of their adult life in that university within their discipline, but they identify as a scholar, researcher and teacher,” she says. “They also feel they do a service to their institution and profession. They have a concept of shared governance, which brings them into planning and the running of institutions as part of building programs and curriculum.”
She adds, “For people not in the higher education setting all the time, they don’t’ understand it is emotional. It’s not like, ‘Yay, I’m done! I can go to the Caribbean!’”
Hutcheson says it is a huge challenge for institutions, public and private of all sizes. It comes up in every conversation with college leadership. She says one client has 30% of faculty eligible to retire, but it doesn’t expect that to happen. “There’s value in having senior faculty members, but also value in having younger, fresh, newer thinking.”
Effective ways to get senior employees to retire
O’Malley says he has seen phased retirement as a strategy to help senior faculty move on. “Many faculty will take deals where time is reduced as pay is reduced gradually over several years,” he says. He offers an example in which a faculty member may get full pay in the first year of a phased retirement program, in the second year he may work half time for three-fourths of pay, in the third year he may work even less for half the pay, then retire. Hutcheson says she has seen phased retirement, up to five years, work as well.
Phased retirement programs have been recommended for all types of employers, but have not seen a high take-up rate. In a 2017 report to the U.S. Senate Special Committee on Aging, the Government Accountability Office (GAO) recommended that employers adopt phased retirement programs, so that they will not suddenly lose the knowledge and experience of Baby Boomers. However, only 15% of workers between the ages of 61 and 66 at the time were semi-retired, according to the GAO.
Regulators have also tried to encourage phased retirement programs. In 2004, the Treasury Department and the IRS issued a proposal for allowing employers to launch “phased retirement” arrangements where workers would gradually reduce their workload as they transition to retirement.
O’Malley has also seen colleges and universities move faculty into administrative positions, such as program directors. He says, especially for those not enjoying their work or not being productive, it renews productivity. And, it frees up faculty space and fulfills needed duties. “Larger universities have lots of non-faculty roles people can fill and be very effective,” he says.
Hutcheson says the more effective programs have a balance between financial incentives and other things senior faculty want to retain. They can continue to have a research role, become involved in committees or in professional conferences—continuing to participate in the life of the community.
For employers of all types, O’Malley says there are prediction models for when people will retire, what workforce needs will be, and what-if scenarios. Employers can use this to plan for promotions and pay increases for less senior employees. He admits that some companies may not be able to afford to do this, but for some, it could be based on the growth of the company.
Similar to higher education institutions moving faculty into different roles, companies can move staff laterally to different positions to free up space for promotions, O’Malley suggests. Hutcheson says employees could be given a mentoring role, with the idea that it is to help them wind down and retire.
However, O’Malley says he hasn’t witnessed much of retirees hanging on in the corporate world. He suggests employers could just start a conversation with employees about retirement, especially with those whose productivity has slipped.
Hutcheson points out that higher education institutions don’t just sever ties with faculty as corporate employers do with employees. To stay vibrant and feel a sense of purpose, even having an office space to come to and continue learning or mentor students is important.
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