Health benefits: Health care claims progress at a moderate pace, in line with age. There are only modest differences among individual claims until age 50 and then again at 65, when treatment of chronic illnesses may be needed. A recent article identified several major employers who reported that older employers actually cost less.
Older workers are farmore likely to carry individual or two-person coverage, which in most cases is less expensive than family or parent-with-children coverage. In addition, employers are increasingly reporting that older workers are in far better health than people their age in previous generations—a trend that is expected to further mitigate health-benefit costs.
Retirement plan costs: The cost of traditional defined benefit (DB) pension plans (which pay fixed benefits per month) does increase with age and length of service. These pensions were designed to encourage workers to have long careers with the same company. Regrettably, many employers now view the retention value of DB pensions as a liability rather than a benefit. But the DB pension is going the way of the dinosaur. Large numbers of DB pension plan have been terminated or frozen to new entrants.
Defined contribution (DC) retirement savings plans, which promise periodic payments to individual retirement savings accounts and shift cost and investment risk from the employer to workers, now far outnumber DB pensions in the workplace. DC plans are generally less expensive and their costs are largely unrelated to age or length of service. The old "higher pension cost" is not relevant for employers providing only DC retirement savings plans.
Paid time off: It’s true that many employers provide more paid vacation to longer service employees. This has bearing on current employees, but it is irrelevant to newly hired older workers. So employers can’t argue that hiring older employees will cost more interms of vacation time, because new hires traditionally have less paid leave.
The additional vacation days provided to long-service and older workers is in part offset by the fact that older employees have fewer absences than their younger coworkers and have greater reliability.
On average, the compensation and benefits costs of older workers only exceed those of younger workers by 1 to 10 percent, depending on the source. There is no survey that says older workers are less expensive based on direct compensation.
However, when you look at the big picture, older workers:
- Have fewer absences
- Are equally or more productive than younger employees
- Have superior customer relations skills
- Are less likely to leave the job after a short time
- Require lower training costs
The bottom line: Older workers are both profitable and productive.