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The workforce is getting older, and this trend is set to escalate. For businesses as employers, this requires consideration. We review what the age demographic shift looks like, how having mature age employees could affect your business's risk profile and how to approach mitigating this exposure.
How Australia's working population is getting older
Within a decade Australia's population is expected to be smaller and older than predicted before the COVID-19 pandemic1, with the estimated national population expected to reach 29.9 million by 30 June 2033, an increase of about 1.2% but a decline on the pre-pandemic growth rate.
A shrinking 'young' population in the traditional working age employment pool could cause economic concern around reduced workers available. Yet one demographic sector could provide the solution for businesses: by 2050 the world's population of over 60s is expected to have doubled to 2.1 billion2.
At the same time Australians are increasingly working to older ages, with seniors over age 60 years represented in employment in greater numbers: in the 20 years leading up to April 2021 the workforce participation rate of older Australians more than doubled. During this time the participation rate for older men almost doubled (from 10% to 19%), while older women's participation almost quadrupled (from 3% to 11%)3.
This is partly because Australian workers are retiring at their oldest age since the early 1970s, with expected retirement age for both men and women remaining unchanged over the last two years, suggesting a fundamental shift in labour market dynamics post-COVID-194.
In both 2022 and 2023 the expected retirement age for men was 66.2 years, the highest since 1972; and for women 64.8 years, the highest since 1971.
It's thought the trend for working longer is being driven by:
- greater flexibility in knowledge intensive roles
- tighter labour market conditions
- better health and education
- bigger mortgages and having children later
- a casualised workforce
- technology and hybrid working more flexibility and enabling working from anywhere.
What are the business risks of having an older workforce?
From a risk management and insurance perspective, an older workforce presents two key increased exposures for employers as they navigate the changing age demographics:
- a greater risk of employer liability claims related to duty of care
- a higher possibility of age discrimination claims.
Both of these exposures can be mitigated by holding employment practice liability insurance.
Risk assessments may need to be broader in scope to include different vulnerabilities of age-related workforce factors. For example, duty of care obligations are likely to increase in practical terms, depending on the nature of the business and the expectations placed on employees. It may be necessary to adjust time allowed for worker safety training to be absorbed, to enable older employees to choose appropriate types of work and to design manual handling tasks to minimise risks.
Businesses should also ensure they have clear health and safety policies in place. Employers could potentially expose themselves to regulatory and civil litigation if they don't accept that their scope of liability may be expanded and ensure they have an adequate understanding of their risk through undertaking appropriate risk assessments.
For example, if an employee working in a noisy environment makes a claim for noise-induced hearing loss, the employer would need to have sufficient evidence to make a case that the hearing loss was age related and not a direct result of workplace conditions.
In addition, making an effort to understand and support your employees' physical and mental wellbeing is important irrespective of age, but with a wider age range in employment this becomes even more essential.
What businesses should consider in facing risks of age discrimination claims
For most people there is no compulsory retirement age in Australia, and it is unlawful to force retirement on an employee because of their age. Employers may have to tread a narrow line between realistic business considerations and potential legal actions.
For example, if a 75 year old wants to remain in a client-facing role and is responsible for selling products and services to individuals who are much younger, there is potential for a cultural disconnect. An employer may feel they risk losing business if they do not move a younger person into that role but it could expose the business to a discrimination claim. Any necessary change must be negotiated carefully.
An older workforce also could be factor in mergers and acquisitions (M&A) transactions. Legally, the Fair Work Act's5 transfer of business provisions means the buyer will inherit the seller's collective agreements when an employee's employment is terminated, they commence new employment with the buyer or if the work performed is substantially the same.
How Gallagher can help
All businesses can consider employee liability insurance as part of management liability insurance, but standard packaged cover may not be adequate for all types of age-related employee claims.
We are advising businesses to ensure any risk assessments they carry out reflect the changing demographic of the workforce and to review the limits of their employers' liability cover. An experienced insurance broker can provide invaluable help with this process.
