© Copyright 2006 Rogers Publishing Ltd. The following article first appeared in the October 2005 edition of BENEFITS CANADA magazine.
How to deal
With a looming shortage of workers, plan sponsors will have to develop creative strategies to engage—and retain—their younger employees.
By Andrea Davis

Much has been written about Canada’s aging workforce and the potential labour shortages companies could face over the next 15 years as baby boomers start to retire en masse. Statistics Canada reports that by 2011, almost 20% of the baby boom generation will be at least 61 years of age, resulting in potential labour shortages in certain occupations. In 2001, boomers—those aged 37 to 55—made up 47% of the labour force. Ten years from now, one-half of them will be 55 or over, and 18% will be over the age of 60. Fertility rates, meanwhile, have remained relatively low over the past 30 years, meaning that there just aren’t enough young workers out there to replace those nearing retirement. The workforce is changing, that much is clear. Are plan sponsors ready?

“I don’t know how many employers study their demographics and say ‘in five years we’re going to have a labour shortage—so today we’re going to have to start thinking about how we’re going to attract and retain,’” says Arnold Yudell, a principal with Mercer Human Resource Consulting in Toronto. “I don’t think they’re there yet.”

The demographic shift in corporate Canada means employers will have to start paying more attention to recruiting and retaining younger workers. These under-30s have a very different outlook on the world of work than their parents. Here, then, is a look at who these younger workers are and what strategies plan sponsors can use to attract and retain them.

Jean-Philippe Naud, an organizational psychologist in the talent strategy practice with Aon Consulting in Montreal defines Generation Y as those individuals between the ages of 16 and 26. “It’s a big talent pool organizations will have to attract if they want to be successful and want to compete,” he says. These young workers are technologically savvy. It’s a generation that says out loud what it thinks. It’s also a generation of paradox, says Naud.

“They want to be autonomous, but at the same time they have a great need for validation. They want to be independent but team spirit is very important. They want to succeed rapidly but retain their work-life balance,” he says. “They want to express themselves but aren’t politically savvy so sometimes they’re misunderstood.” Pensions and benefits aren’t generally on their radar screens.

“Under age 30, they’re looking for a competitive base salary, great work environment, and good opportunities to learn and grow. And that’s about it,” says Jim Murta, a principal with Towers Perrin in Calgary. “You wouldn’t have anyone doing an awful lot of comparison between what they might get in benefits at one place versus what they might get at another place.”

Elaine Noel-Bentley agrees. She’s senior director, total compensation with Petro-Canada in Calgary. The company has 4,700 employees worldwide, the majority of whom are in Canada. It conducts annual recruitment drives at some Canadian universities. New graduates, she says, just aren’t that interested in pensions and benefits.

“We don’t do anything specific around benefits to attract new grads,” she says. “We have to have a competitive package but, after that, pensions and benefits aren’t the primary factor for taking on a job or not.”

So what is this generation looking for when it comes to the working world? Generally, it looks for interesting work, ethical organizations, and flexibility. “New grads are very interested in not only competitive compensation packages but also the nature of the work, and that it’s a reputable organization with appropriate practices,” says Noel-Bentley. “So we have to make sure we document who we are, what we are, what we do, and how we do it.”

Work-life balance also appears to be more important to younger workers. “You get a lot in that 18 to 29 age group who are willing to work very hard while they’re at work, but they also want time away from work,” says Murta. “You can have someone quite willing to put in a 50-hour work week, but they want four weeks of vacation.”

Interestingly, extra vacation time is one of the leading benefits a plan sponsor can offer to build on attraction and retention. An extra week of vacation every year was mentioned by 66% of respondents in a 2005 Ipsos-Reid poll that asked what employers could do to entice employees to stay at one job or go to another (see “Worker snapshot,” below).

Improved employee benefits such as increased salaries and broader health and dental coverage topped the list at 70%. Other benefits such as sabbaticals, education, and health club memberships were mentioned by 57% of respondents.

Flexible benefits plans are also gaining ground as a retention tool among younger workers. In a recent survey of 200 Canadian companies by Hewitt Associates, 52% of sponsors currently offer flex plans, or plan to offer them in the next two years. Another 33% anticipate offering them in the future.

“Of the clients we work with who are implementing flexible benefits programs, the rationale for that is really to attract and retain a varied workforce,” says Hewitt’s Sarah Beech, benefits practice leader in Toronto. “With the younger demographic, that’s recognizing that they may be incredibly healthy so having a lot of healthcare and dental might not really turn their crank. They appreciate that opportunity to trade those benefits for buying extra vacation days or spending that company money on a fitness club membership that supports that other piece of their balanced life.”

From a retirement perspective, defined contribution(DC)plans have an obvious advantage for younger workers. “DC is clearly more portable and there’s more control over how these funds are invested,” notes Beech. “The younger worker is looking for what’s the right career path or right place for me now, not necessarily what’s the right career or right place for me forever.”

Articulating a career development path is another area where plan sponsors can endear themselves to younger workers. While the clear-cut career ladders of the baby boomers don’t hold much interest for younger workers, they are very interested in knowing how their day-to-day jobs relate to corporate objectives, as well as what training and development is going to be offered.

“With this generation we’ve seen a lot of employees say ‘no’ to promotions, which mystifies some managers because they believe they’re not engaged,” says Naud. “But it’s just a question of wanting balance and wanting to explore.”

Adds Beech: “We’re doing work with lots of employers who have great programs and processes in place but there’s not clear communication or direction or transparency for an employee entering the workforce or who’s been there short-term to understand how that career path happens.”

In future, there may be more of an emphasis on tailoring the total remuneration package to a particular group. Younger employees, for example, might want more cash, fewer benefits. Others might like a different mix. This total rewards approach is not a new idea but one that may slowly gain acceptance as the greying of Canadian workplaces continues.

“Right now, employers are not looking at using their benefits plans as an attraction and retention tool,” says Bob Weinerman, principal with Mercer Human Resource Consulting in Toronto. “But going forward, I think employers will start putting more emphasis on flexible benefits and there will be more of a movement towards a total remuneration approach. Employers have only so much money to spend and they want to make sure employees appreciate what they’re going to get.”

While attracting and retaining young workers will become an increasingly important issue to address, plan sponsors can’t afford to forget the baby boomers at the other end of the demographic continuum. “We need those people not only for manpower, but also to coach and mentor those younger workers,” says Naud. “Succession issues are coming and we have to make sure the two generations work together to fill in the gap and ensure there’s no loss of knowledge within the organization.”

Workers snapshot

In their book What Canadians Think About Almost Everything (Doubleday Canada, 2005), authors Darrell Bricker and John Wright of polling company Ipsos-Reid surveyed Canadians on their opinions about workplace issues. Here’s a selection of their findings.

  • 79% of university students say they will enter the workforce immediately after finishing their schooling.
  • 24% say they will spend five years at their first job; 15% say three years; 15% say two years; 9% say six to 10 years and just 2% say 31 to 50 years.
  • 22% say they will change jobs three times throughout their careers; 17% say six times and 14% say five times.
  • 75% of university students would take a 10% cut in salary in exchange for medical and dental coverage of all basic expenses.

Andrea Davis is a freelance writer in Guelph, Ont. andrea.davis@rogers.com