Friday, April 3, 2009

eloitte Debate: Don't Throw Baby Boomers out with the Bath Water - Phased Retirement

What: "Don't throw Baby Boomers out with the bath water! Can phased
retirement help companies cut workforce costs while reducing the
need for layoffs?"

Who: John Fiore, principal, Deloitte Consulting LLP's
Human Capital practice

When: Available immediately


Details: When the economy was growing, companies mostly viewed phased retirement as a way to retain experienced workers in the face of a talent crunch. Now that the economy is in full retreat, many organizations are taking another look at phased retirement as a way to cut labor costs without resorting to additional layoffs.

"Phased retirement allows baby boomers to reduce their work schedules and salaries to fit their maturing lifestyle, and in many cases allows them to work past the traditional retirement age," explains John Fiore, a principal within Deloitte Consulting's Human Capital practice. "This can help a company significantly reduce its labor costs, without allowing critical knowledge and talent to walk out the door. It can also facilitate a smoother transition to the next generation of workers."

But in order to capture the full benefits, companies need to do it right. Here are some practical tips to consider in designing an effective phased retirement program.

Pick your spots. In order to avoid regulatory pitfalls, phased retirement programs generally need to be open to everyone. But what if you want to keep certain types of workers more than others? The most effective programs are carefully designed around the needs of workforce segments that are particularly critical to business success. A similar principle applies when deciding which countries should consider phased retirement programs. Workforce and retirement laws vary widely from country to country, so it's important to choose markets where the potential benefits outweigh the potential headaches.

Use existing retirement programs to supplement current income. Many prospective retirees are interested in scaling back their hours, but are not able or willing to absorb the full hit to their income. By offering people early access to their retirement income programs, they can supplement their paycheck today while reducing their future retirement needs by remaining in the workforce longer.

Capitalize on the transition. Phased retirement not only allows a company to reduce its payroll, it also provides an opportunity to move people to less costly benefits programs. For example, one of the biggest draws in the U.S. for phased retirement is that it allows employees to extend their healthcare coverage. But that doesn't mean their level of coverage has to stay exactly the same. Shifting to aggressive consumer-driven programs as a condition to the phased retirement program can save the company -- and the employee -- money without a significant decline in coverage or service quality.

Phased retirement is a great option for older employees. It allows them to scale back their work hours while maintaining a healthy income for a longer period of time. It also enables them to keep doing work that is meaningful and valuable, and helps them fulfill their personal responsibilities.

The potential benefits for a business are even greater. Phased retirement allows you to reduce your labor costs without undermining morale and productivity. Best of all, it lets you hold onto your most experienced workers so they can share their knowledge with others, and provides a ready source of talent for when the economy recovers.

To view Fiore's points and counterpoints on phased retirement, please go to This topic is one in a series of Deloitte Debates that examine today's pressing business issues from multiple perspectives. New debate topics are added weekly.

To speak with Fiore, please contact Britton Josey at +1 404-220-1334 or

As used in this document, "Deloitte" means Deloitte Consulting LLP and Deloitte Services LP, separate subsidiaries of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

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