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Older Vs. Younger

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Changes in employee tenure during the second half of this decade have caused a rise in benefit costs, according to a recent study.

The study, conducted by the benefit consulting firm Watson Wyatt Worldwide (Bethesda, Md.), cites an average job tenure of 13.4 years - up from the average of 12.6 years earlier in the decade. The percentage of employees staying at a company for at least 10 years was 58.6 percent, and the percentage of employees staying over 20 years was 22.6 percent. Again, both of these percentages reflect increases from the early '90s.

But the most interesting finding, and the one with the greatest impact on the cost of benefits, was a correlation between employee age and employee tenure.

"Older people tend to stay in their jobs longer," states Sylvester Schieber, vice president and director of research at Watson Wyatt. "So, age and tenure tend to go up together."

This rise in average employee tenure and average employee age has driven up employers' costs to provide benefits.

"Older people use more health care benefits than younger people; older people contribute more to 401(k) plans that the employer matches," Schieber adds. The older the workforce and the longer their tenure the higher the benefit costs, especially for health care, pension and 401(k) plans.
A younger workforce or shorter tenures is not necessarily the solution. Companies with frequent turnover are faced with high recruitment and training costs. Also, many companies cite a need to "know the business," a skill that is acquired through years of experience with a company.

The resulting paradox - expensive young employees versus expensive older employees - must be weighed and examined by companies. High-tech companies, for example, are currently content to recruit young employees who may only stay with the company for a few years. On the other hand, companies in finance and investing require the skills and know-how that come from years of experience and client contact.

A company's benefit program should be matched with the company's hiring strategy and focus on employee age and tenure. For example, a typical benefit for a company looking for younger recruits would be flextime. Companies seeking long-term employees would tend to focus more on retirement benefits.