The world of work is changing. Many people are retiring. Employees and employers are rethinking how to make the transition smoother. One idea that is gaining traction is flextirement. This blog will explain what flextirement is, how it works and why it matters for HR leaders. It will also cover the challenges, real life examples and what the future might hold.
What Is Flextirement?
Flextirement is a work arrangement that helps employees transition from full time jobs to retirement. Employees gradually reduce their hours and responsibilities rather than stopping work cold turkey. It allows people to keep earning and stay connected to the workplace while having more free time.
The word, ‘flextirement’, comes from combining ‘flexible’ and ‘retirement.’ It is sometimes called ‘phased retirement.’ The goal is to make the move to retirement smoother for both workers and employers.
How Does Flextirement Work?
Flextirement lets employees cut back on their work hours. For example, someone who used to work 40 hours a week might now work 20 or 30 hours. Both the employer and the employee agree on the exact hours.
Work times might also become more flexible. Workers may decide to work remotely, work fewer days, or work less hours. This aids them in striking a balance between work and leisure activities or family time.
As part of flextirement, employees often start to draw on some of their retirement benefits. They might take a portion of their pension, but still keep working part-time.
Why Is Flextirement Important?
Flextirement is important for several reasons. First, it helps employees ease into retirement. Many people find this transition hard. Flextirement gives them time to adjust both financially and emotionally.
Second, it helps employers keep experienced workers longer. When senior staff retire, businesses lose important expertise. These workers can continue in a mentoring or part-time capacity thanks to flextirement. This way, they can help train younger workers and contribute to productivity in the company.
Third, flextirement can help with labor shortages. As more workers retire, several businesses are experiencing a labor shortage. Flextirement can help address the gap by keeping experienced people in the workforce longer.
How Are Pay and Benefits Handled in Flextirement?
When employees move to flextirement, their pay and benefits are usually prorated. If they work half as many hours, they get paid half as much. Benefits like health insurance and retirement contributions may be reduced but often stay in place as long as they work a minimum number of hours.
Some companies let employees start drawing on a part of their pension while working part-time. This is sometimes called flexible retirement. The employee’s pension is calculated on final salary and years of service. If they work part-time, their pension may be reduced but they still earn pension credits for the time they work. For example, if they work 20 hours a week instead of 40 they get paid half as much. Their pension contributions may be reduced but they still build up pension credits for the time they work part-time.
Also Read: Designing a Human-AI Workforce: Integrating AI Agents Across Departments
Case Studies
Many companies are now offering flextirement programs. Here are a few examples:
HireClix
HireClix, a recruitment advertising agency, has created a flextirement plan for its employees. Neil Costa, the CEO, says that traditional retirement often means employees leave the company completely. But with flextirement, employees can move to part-time roles. This keeps valuable knowledge in the company and helps employees transition to retirement at their own pace.
Other Companies
Many large companies are also offering flexible work options that can support flextirement. For example:
Nike gives workers flexible hours, lets them work from home, and has wellness programs to help them balance work and life.
Microsoft lets staff choose how they work, either hybrid or remote.
Delta Airlines offers part-time jobs and job-sharing, which can be helpful for those transitioning to retirement.
They all know being flexible keeps employees happy and they’ll stay.
Trends to Keep an Eye On
Flextirement will become common in the coming years. More people will wish to retire gradually as the workforce matures. Companies must figure out how to retain seasoned employees while creating space for fresh talent.
Some trends to watch:
- More Companies Will Offer Flextirement
As more people approach retirement age, more companies will offer flextirement programs. This will help them retain knowledge and skills while supporting older workers.
- Flexibility Will Become the Norm
Flexible work arrangements are already popular. In the future, they will become common. This will make it easier for employees to transition to retirement at their own pace.
- New Policies and Benefits
They may provide tax breaks for businesses that provide flexible retirement plans. They may also change pension regulations, making it simpler for people to work part-time while receiving benefits.
- Focus on Knowledge Transfer
Flextirement will help companies manage the transfer of knowledge from older to younger workers. This aids in business continuity and innovation.
Practical Steps for HR Leaders
- Start the Conversation Early
- Discuss retirement plans with staff in advance.
- Ask if they are interested in flextirement.
- Create Clear Policies
- Develop guidelines for how flextirement will work in your company.
- Make sure pay, benefits, and work schedules are clearly defined.
- Train Managers
- Help managers understand the benefits of flextirement.
- Teach them how to support employees who are transitioning to part-time roles.
- Communicate the Benefits
- Let employees know that flextirement is an option.
- Highlight how it can help them and the company.
- Monitor and Adjust
- Track how flextirement is working.
- Make changes as needed to improve the program.
Real-world Examples of Flextirement
Let’s look at a real-world example based on the USS flexible retirement scheme:
Employee Age: 60
Current Role: Full-time
First Flex: Employee reduces hours to 80% of full-time and draws part of their pension.
Second Flex: Two years later, employee reduces hours to 50% and draws another part of their pension.
Final Retirement: At age 65, the employee fully retires and receives the rest of the pension.
This approach lets the employee gradually reduce the workload and start enjoying retirement benefits while still working.
Benefits of Flextirement
Flextirement offers many benefits for both employees and employers:
For Employees
Easier Transition: Moving into retirement is less stressful.
Continued Income: They continue to make money while lowering their hours.
Maintained Benefits: Health and retirement benefits may continue.
Stay involved: They can keep in touch with coworkers and use their skills.
For Employers
Retain Knowledge: Skilled workers stay longer and share what they know.
Smooth handover: Helps younger staff get ready for bigger roles.
Fill Talent Gaps: Reduces problems from not having enough workers.
Boost Morale: Shows the company cares about its employees.
Challenges
Flextirement also has its difficulties:
- Setting up these programs can be tricky, especially when dealing with pay and benefits.
- Companies should avoid treating employees unfairly based on their age.
- Workers must clearly understand how flextirement works and what choices they have.
- All eligible employees should have the chance to use flextirement, not just some.
Future of Flextirement
Flextirement is here to stay. As the workforce ages, more people will want flexible retirement options. Companies that offer flextirement will have a competitive advantage in attracting and retaining talent.
In the future:
- Employees can choose from a range of flextirement plans.
- New laws and policies may make flextirement easier to implement.
- Digital tools will help manage flextirement programs and track employee preferences.
Conclusion
Flextirement is a smart way to help employees into retirement. It gives employees flexibility, ongoing pay and a clear path to retirement. Employers also benefit from knowledge retention, talent gap filling, and business continuity.
HR leaders play a key role in making flextirement work. They may help their companies prosper in a changing workplace by developing policies, outlining benefits, and offering assistance to staff members. As more companies adopt flextirement, it will become part of the modern workplace. The future of retirement is flexible and that’s good for everyone.
