Personnel Policy Implications Due to Demographic Change (2nd Quarter 2023)

Focus on Younger Age Groups Is Increasing

Despite demographic change, the focus seems to be clearly on younger age groups, according to the survey results. For example, 63% of the respondents state that the focus with regard to employment and further training will increase in the coming years on the under-40 age group. This seems to be the case especially in larger companies: in companies with 500 or more employees, 74% estimate that the focus on those under 40 will increase; in companies with 250–499 employees, the figure is 71%, and in companies with up to 49 employees, only 54%. Differences are also evident among the various sectors of the economy. While 68% in manufacturing see an increase in the focus on this age group, the figure for services is 60%.

One in Five Companies Promotes Cooperation between Different Age Groups

The question of whether companies actively promote cooperation between different age groups was answered in the affirmative by one in five companies. Service providers (24%) or companies with 500 or more employees (40%) in particular answered in the affirmative. Two blocks in particular stood out from the free response options: teamwork, workshops, and events; and mentoring, sponsorship, and coaching. Around 60% of the companies that actively promote exchange between the age groups rely on a package of measures to improve team-building. A good quarter would like to improve collaboration through mentoring, sponsorship, or coaching programs. The remaining 15% named other measures such as special learning phases, meetings, and open exchanges. 

More than Half of All Companies Take Measures to Keep Older Employees in the Company Longer

Almost 60% of the companies surveyed are taking measures to keep older employees in the company longer. Here, too, the service sector and companies with more than 500 employees stand out with above-average proportions (61% and 66%, respectively). The most popular measure, with 85% approval, is more flexible working arrangements. This is the right place for companies to start: researchers found that older employees want to work longer, especially when it comes to jobs with flexible working hours (Ameriks et al. 2020).  Age-friendly jobs, partial retirement, and health promotion have been taken up by more than 40% of the companies participating in the survey. Around 15% of those surveyed resort to salary increases and targeted training to retain the older generation. Other companies give experienced employees freedom in designing projects, more vacation days, or compensatory time. The survey results show that the focus on the younger generations is gaining in importance, but at the same time, many companies are also looking to retain older employees for longer.  

Severance Models: Strong Heterogeneity among Companies

Some companies offer their employees severance models and retirement transition arrangements as additional benefits. Partial retirement is part-time employment regulated by Germany’s Partial Retirement Act. Although there is no legal entitlement to partial retirement, a voluntary agreement can be reached between employer and employee. In partial retirement, the previous weekly working hours are reduced by half. In this case, the employer is obliged to top up the salary and make additional contributions to pension insurance. The old-age pension is another option for retiring early – that is, before reaching the legal retirement age. Insured persons who have paid into the statutory pension insurance scheme for at least 45 years and have reached the relevant age can claim the deduction-free pension.  

The majority of companies (61%) do not offer partial retirement. This model exists in 37% of the companies and is to be retained in the coming years. Only 2% of the companies plan to abolish it, on average aiming to do so either this year or by 2028 at the latest. There are clear differences between the business sectors: while half the manufacturing companies allow part time work, the figure is 31% in the service sector and 27% in trade. A comparison of company size shows that it is mainly those with large headcounts that offer part-time work for older employees.The model of old-age pension after 45 (insured) years is used more frequently than partial retirement. It is used by 50% of the companies surveyed. There are only minor differences between the economic sectors: while 59% of manufacturing companies surveyed use it, 46% of the service sector and 42% of the trade sector do. Here, too, a comparison by size yields divergent results: in 70% of companies with 500 or more employees, the old-age pension is applied after 45 years of contributions, while in companies with up to 49 employees, this occurs in only 34% of cases.

One in ten of the companies surveyed uses special severance models. While 18% of companies in manufacturing make use of these measures, the figure is 9% for service providers and 4% for trade businesses. In the size categories, the picture is similar to before: the larger the company, the more likely these special models are to be used. In companies with 500 or more employees, 29% offer severance models, while in companies with 250–499 employees, the figure is 14%. In smaller companies, these are much less common: in companies with 50–249 employees, 8% offer these models and in companies with up to 49 employees, 3% do.