Age-Inclusive Compensation and Benefits
Focusing on your hiring process, team management and communications can reduce biases
by Heather Tinsley-Fix and Ashley Powdar, AARP, March 14, 2022
En español | Most human resource managers know that compensation and benefits are a key part of recruiting, engaging, and retaining top talent. It is not unusual for large companies to have explicit compensation philosophies, and even small organizations have implicit guidelines on fair compensation.
However, these philosophies and guidelines may not take the age-diverse nature of the workforce into account when they are put into practice. Businesses of all sizes can struggle to recognize and predict the range of demands and preferences when dealing with employees of differing age groups. In general, older workers often place more emphasis on benefits, and younger workers often focus more on direct monetary compensation. For example, past surveys show that Baby Boomers place more emphasis on healthcare (expanded healthcare, no premiums) than Millennials do, but Millennials rank tuition reimbursement far higher than other generations.
However, many of these preferences reflect life-cycle changes combined with market conditions (such as the rising cost of higher education, the need to upskill and reskill, etc.), rather than exclusively generational characteristics. As the workforce continues to age and new generations enter, the preferences of different generations will likely shift as they enter different life stages. Additionally, the pandemic has significantly altered the benefit landscape in a number of ways, including vastly increasing the need for flexible schedules, mental health support, additional or flexible paid leave, and support for caregivers of both children and elders.
According to the International Foundation of Employee Benefit Plans, 21% of employers began offering emergency leave for child care, 13% began offering the use of paid leave for any reason, and 59% implemented flexible schedules as a direct result of the pandemic. And a survey by benefits provider Guardian Life revealed that 3 in 4 U.S. employers changed their unpaid leave policies to paid leave. Whether these changes will remain in place as the pandemic becomes endemic remains to be seen; however, the shift toward greater flexibility, increased health and wellness offerings, and support for caregivers is strategically important to building age-inclusive policies, as they benefit all generations.
The following are some things to consider when it comes to designing compensation and benefits for a multigenerational workforce.
Provide education and decision support. In comparison with older generations, Millennials and Gen Z are less likely to know what benefits their employers offer. For instance, according to Employee Benefits Research Institute’s 2015 Health and Voluntary Workplace Benefits Survey, Millennials were more likely than other workers to respond that they do not know about their benefits, and their participation in benefit programs was generally lower than Baby Boomers and Gen Xers. By contrast, a survey by Voya Financial in December 2020 revealed that over half (56%) of employees spent more time reviewing their benefits offered by their employer during the fall open enrollment period than in prior years. This finding suggests that organizations may want to increase their education efforts, particularly with younger generations, to help employees understand how to maximize their benefit selections.
Review salary bands. Fairness and gap analysis are among the biggest considerations when assessing compensation. Policies involving compensation need to be fair and applied consistently across age groups. Unfair policies can even lead to charges under federal and state law. For longer-tenured workers, consider the potential for salary compression. If raises have been low for several years, you may find that older workers or those with long tenures are not being paid much more than new hires.
Take a data-driven approach. As noted above, when surveyed, younger workers tend to care most about benefits related to education, while older workers shift their attention to benefits such as health care. However, these preferences can change. For example, as the focus on upskilling and lifelong learning increases, older and younger workers may come more into alignment on the value of tuition reimbursement. As remote work continues to be part of the future work landscape, flexibility and home office support will likely appeal across generations. The best way to stay abreast of employee needs of all ages is to conduct regular surveys and focus groups, combined with data on utilization rates.
Recognize the diversity of caregivers. The typical view of a caregiver is a white woman in her 50s or 60s; however, today’s caregivers are much more diverse. According to AARP’s 2020 Caregiving in America report, nearly a quarter of family caregivers are Millennials (23%), 6% are Generation Z, 39% are men, and 17% are Hispanic/Latino. In addition, demographic trends are placing more of the burden of caregiving onto working-age adults – of the 53 million family caregivers in America, 32 million of them are also in the workforce. With one in 5 current employees likely to be caregivers, supporting this aspect of their lives helps retain employees across diverse groups.
Balance choice with program needs. Younger workers are more likely to want employers to give them choice and control over their benefits. Keep in mind that, from an operational standpoint, employers often are not in a position to offer employees exactly the benefits they want at a given life stage. In addition, this approach may not always benefit the employees themselves. For example, many Millennials might rather receive the part of their compensation currently spent on benefits as cash. However, allowing this could not only weaken the overall employee benefit program due to lower participation, but also do a disservice to younger workers who should pay attention to their health and financial security. Examples of such situations include retirement benefits and healthcare programs. In this regard, employers have to balance the preferences of some employees against larger objectives.
What’s the key takeaway? Avoid assumptions about benefits and compensation level based on an employee’s age. Life stage is a more revealing factor of an employee’s wants and needs. If unsure where to begin, start with an employee survey to gauge perception and satisfaction levels. It could also be helpful to audit existing benefits to understand the percentage breakdown of utilization rates. A competitive benefits package and compensation structure meets the needs of a multigenerational workforce, not solely the perceived desires of one generational cohort.
Heather Tinsley-Fix is a senior advisor for Financial Resilience at AARP, where she leads the organization’s work on employer engagement. With her background in marketing, innovation, and program management, she works with employers and job seekers to provide thought leadership on 50+ labor market issues and create resources that help employers capitalize on the value of experience.
Ashley Powdar is employer content lead for AARP's Financial Resilience team. She works with participants in the organization's Employer Pledge Program to promote the value of a multigenerational workforce. She also assists and reports on issues that affect small-business owners.