Could an Early Retirement Package Help Your Company Achieve Its HR Objectives?
Organizations may consider offering early retirement packages for different reasons. Some need to cut costs, and would rather provide employees with an incentive to take a soft exit rather than conduct layoffs. Others want to open up headcount opportunities to bring on employees with fresh ideas, or promote talent to help them gain management experience. The Society for Human Resource Management (SHRM) reports that approximately one-third of individuals who are offered early retirement incentives will accept. According to the SHRM report, lower-performing employees often opt to accept an ERI. This may help organizations cull their least productive staff. What do HR leaders need to know about creating an early retirement package?
Ensuring Compliance with Regulations
When developing a soft exit scheme for employees, SHRM notes that it's important to ensure your plans don't unfairly target specific classes or run afoul of age-related discrimination laws. You may wish to start by consulting a knowledgeable HR consultant. However, it’s a best practice to review such a plan with an employment attorney before implementation. Depending on the plan, there are likely federal and state laws and regulations, and possibly even local laws, that can impact how these plans should be structured. Define your business goals and seek expert counsel on:
- Who will be eligible for these incentives;
- What benefits your company will offer;
- Timelines for how the programs will be designed, communicated, and available to workers; and
- Any communications and coaching for managers and HR teams involved in phased retirement.
Creating a Voluntary Retirement Package
A phased voluntary retirement package typically gives employees the option to retire if they meet certain criteria. Often, individuals who are a certain age or have a certain number of years of service can elect to accept the ERI. There's generally a specific period of time that's given for employees to consider the option and make a clear decision. It's also important to define what the benefits will be and what the eligibility period looks like.
Ensure that communications are carefully handled, and that no employee feels like they have been pressured to accept or are being discriminated against based on age or participation. Finally, have a clear plan in place for the process and paperwork that will need to be filed in each case. If including waivers and agreements ensure notice requirements and timeframes for consideration are met. Create a checklist of the paperwork that must be retained for each employee to help prevent against claims or other legal issues.
For many firms, offering retirement incentives can help address issues ranging from cutting costs and downsizing to providing opportunities for new employees. It's best practice for a company to define its business goals, consult with HR experts and an attorney, and design a package that's compelling enough to achieve its objectives.