Michele Harmon
Remember the term, Paradigm Shift? It is defined as a fundamental change in approach or underlying assumption. Remember Jack Nicholson’s famous quote from A Few Good Men? “You Can’t Handle the Truth!” Well, as employers, we need to be able to handle the truth. It is time to figure out the barriers to retaining and rehiring Baby Boomers and Gen X. We need to think differently and find a workaround fast.
Modern management theory and human resource leaders have stated for over a decade that the Millennials and now Gen Z only want to stay on a job if they feel appreciated, heard, and have lots of time off. As the employer, please do not dismiss this but instead recognize that current and future employees are indefinitely in the driver’s seat, and they all want more money, more benefits, and time off when they want, no matter their age.
Who is leaving the workforce that employers need desperately to retain? The two largest groups are older adults, over 50, and younger mothers. The numbers are staggering of older workers who left their current jobs for either retirement, another workplace, or to start a new venture. Adults want to live their lives on their terms after having endured the tumults of the Pandemic and months of being tethered to a computer.
Employers need to retain experienced workers with experience, knowledge of best practices, and standard operating procedures that work. Older employees have hard-earned historical knowledge that employers cannot afford to lose.
This month we tackle the exodus of older adults and examine strategies to get them to either not depart to another position elsewhere or not to retire. According to Pew Research, 3.2 million more Baby Boomers retired in the third quarter of 2020 as compared to 2019.
According to the U.S. Bureau of Labor Statistics, four million Americans quit their jobs in July 2021, and the numbers continue to climb. During the Pandemic, 401K investment accounts grew, the value of housing rose, and Americans accumulated an excess of $2 trillion in savings.
Baby Boomers who travel for their jobs may not want to travel any more. Those who spend hours a week commuting may not want to return to the freeways, having learned that they can do their job from home. This realization poses a big problem.
Human Resource leaders knew the departure of the Baby Boomers was imminent, even before the Pandemic, and that knowledge, skills, and abilities (KSA) would be lost if we did not work to maintain senior staff. Organizations need senior staff to provide leadership and guidance to younger employees.
When the Pandemic hit, the world of work lost Baby Boomers and older Gen X’s much sooner than expected, and the world of work needs some of them back on their terms. Employers need to be flexible and allow employees to continue to work from home. If not, the employers will see more resignations.
A Dell couple in their 50’s moved to Oklahoma from Austin during the Pandemic. The wife had always worked from her home office due to her job duties but not the husband. He and Dell realized that he could do most of his work from home and commute to Austin occasionally. Even with a state income tax, their cost of living for them was far less.
Demand for workers is at its highest level in decades, and companies cannot fill the jobs.
Be proactive now to retain the workers. It is cheaper for employers to raise pay and add additional benefits than to recruit, hire, train, and deal with the issues of new employees.
Get ahead of the Great Resignation. It is a supply and demand issue that we can all understand.
As an example of the strictest rules imposed to prevent rehiring retired staff, let us review the current costs for school districts and public universities to rehire a retired educator who participates in the Teacher Retirement System of Texas (TRS). It is not cost-effective to rehire a retired educator full-time due to self-imposed costs by the State of Texas and TRS on the school district or public university. No surprise that the rules are very complicated and seem to change without notice.
If you continue to read, you will find it very interesting where your tax dollars go. If you do not like Robinhood, the reader will discover the rehire penalties for educators interesting, if not offensive.
The two largest employers in Ector County and Midland County are the school districts that struggle to be fully staffed. Both school districts have learned to be flexible by taking advantage of various programs and grants to provide them the ability to hire degreed but not certified educators while the individual is getting their certification.
However, let us get back to the retired educators. There would be a wealth of knowledge and experience if some of the retired educators returned to work. So, how do we get the retired educators back that have either had a change of circumstance or have found that they cannot live on their retirement income? The answer is not an easy one.
The bottom line, schools are allowed to hire retired educators under specific conditions and with a substantial financial penalty that we, the taxpayers, pay via the school district sending money back to TRS. Would the financial penalty paid to TRS be better spent in the educators’ pockets?
The State of Texas does allow school districts to hire retired educators without the financial penalty for the next couple of years if they are solely paid from federal dollars to address Covid related student gaps. There is also no penalty for educators that retired in 2004 or before. I only know two educators in that group, and their school district would sorely miss their KSAs if they left.
The current return to work penalty is a 15.75% surcharge on the gross salary plus a $535 per month surcharge on medical coverage. If the educator has 25 years of experience and makes $75,000 per year, the return to work penalty is $11,812 per year surcharge plus a medical coverage surcharge of $6,420. The retiree will be paying for Medicare from their gross pay as well. The total amount of money collected goes back to TRS. What is the money used? Where is the line-item budget? Isn’t a surcharge a tax?
School districts also need substitutes, so a retired educator can be hired as a substitute but not for a vacant teaching position for more than a specified number of days. Substitutes usually make around $100 per day and pay taxes out of the gross. The number of retirees substituting has dropped with Covid. Is that a surprise?
Oh, what a tangled web we weave. The state’s system to rehire retired educators on a temporary or permanent basis is very complicated and confusing at best.
Overall, people want more pay and benefits, not less, to remain or return to work.
However, in the non-governmental world of work, the good news is that the IRS has altered its rules regarding hiring retired staff without penalty to the retiree or the company. Our Texas education system and the rulemaking folks have not caught up.
A welcome surprise is that the IRS has recognized the critical labor shortages and has stepped in to try and remove some barriers that previously prevented employers from rehiring retirees. What if the employer is interested in bringing back retired workers?
In that case, those eligible to retire now or shortly, or those who have retired, need to review the IRS publication from October 22, 2021. The document explains in simple language how the employer may allow your current employee to retire and then rehire them while they are collecting retirement benefits and how the employer can rehire a retiree and not penalize their retirement income. The document is tied to Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020. With the tremendous shortage of workers in Texas, why haven’t more employers heard more about this?
Speak to your financial advisors and revisit the rules of the retirement program offered. I am not a financial planner and do not give financial advice, but why not check out this new IRS document?
The world of work needs more—not less—qualified workers.
___________________________________________________________________________________________________
“Your employees are the heart of your organization.” Dr. Michele Harmon is a Human Resource professional, supporting clients in Texas and New Mexico that range in size from five to more than 3,000 employees. Email: micheleharmon1@gmail.com