Employee retirement is one of the inevitable realities that employers face in the course of managing people in the organization. Retirement is the time when an employee leaves the organization based on age as provided by law, or as set by the company, which also considers the length of service aside from age. In our country, the Labor Code stipulates that mandatory retirement is at the age of 65 but there are many companies that set their retirement age at 60 or if an employee has rendered 20 years of service, whichever comes first.
Currently, how do employers prepare for their employees’ retirement? For one, they pay the Social Security System (SSS) contribution as required by law. However, there are many companies that voluntarily (or through collective bargaining) adopt retirement pension schemes that are over and above than what the SSS retirement benefit offers. But I think the existing content and structure of the retirement support system, including laws creating and governing it, is not adequate from both a strategic perspective and a ‘common-good’ perspective.
How can employers implement a strategic and employee-centered retirement plan? The retirement scheme must have the following elements.
First, an employer must set up a simplified plan that can help both the employer and employees from the start until actual retirement. The mechanism, coverage, and benefits should be well communicated since very few employees calculate how much they need to save for retirement. Second, for retirement savings plans, employers typically have a moral obligation to invest in ways that shield future retirees from complicity in morally objectionable corporate behavior. Third, the company must prepare a scheme that creates an independent source of retirement savings that is flexible. It means the employees will have the prerogative to invest in a way that best fits their goals and needs from a range of investment choices that are available to them.
The other important aspect of implementing a strategic and employee-centered retirement plan is the sustaining elements. One, the company must determine ways to keep older or senior employees motivated, satisfied, and productive at work. Two, it must ensure that these employees are not discriminated against in terms of their working conditions, compensation, promotion, and other rights as mandated by laws and ethics. Three, it must provide those who are nearing the retirement age trainings that will equip them with necessary skills like financial planning, investment, entrepreneurship to start a small business, social networking, time management, and stress management. Lastly, the company must set up a knowledge management program where the knowledge, expertise, and experience acquired by these people over the years are documented for reference and transferred through coaching or mentoring to younger or junior employees.
I am hopeful that there will be more and more good employers who will plan strategically for the inevitable decent retirement of their employees so that these people will still find meaning in life and enjoy the fruits of their labor after selflessly working for many years. After all, organizations who have the reputation to be good employers will always be sought by potential talents as companies of their choice. Employers should always remember that it pays to invest in employees’ retirement.
Dr. Divina M. Edralin is a full professor at the Management and Organization Department of the Ramon V. Del Rosario College of Business of De La Salle University. She is also the Vice Dean for Research and Graduate Studies of the college.