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Employers might want to think about new ways to structure benefit plans in light of a study showing that employees now are remaining on their jobs longer and that the workforce is aging, boosting benefit costs, a consultant says.
"They need to be cognizant of these trends and need to think about their compensation packages," said Sylvester Schieber, vp and director of research at Watson Wyatt Worldwide, the Bethesda, Md.-based benefit consulting firm that released the study, "Have Jobs Become Less Stable in the 1990s?"
Average job tenure in the years 1995 through 1997 is 13.4 years, up from 12.6 years earlier in the decade, according to the study. The percentage of workers staying with a company at least 10 years rose to 58.6% from 54.5%. The percentage of employees staying with the same employer for 20 years or more was 26.2% in the 1995-97 period, compared with 25.6% earlier in the decade, the study showed.
The very largest companies, defined in the study as having more than 80,000 employees, have had the highest average tenure throughout the 1990s. The latest figure, covering the 1995-97 period, is 14.6 years.
The study analyzed the employment records of 51 midsize and large companies for the beginning and the end of a five-year period running from the early through the later 1990s. The starting points for the analysis of the company records differed, ranging from 1990 to 1992. The size of companies in the study ranged from 1,000 employees to nearly 200,000 workers.
Tenure was particularly affected and driven by age, said Mr. Schieber. "Older people tend to stay in their jobs longer," he said. So, "age and tenure tend to go up together."
More importantly, both factors influence the costs of benefit plans, Mr. Schieber said. "Older people use more health care benefits than younger people; older people contribute more to 401(k) plans that the employer matches," he said. The older the workforce and the longer their tenure, the higher the benefit costs, especially for health care, pension and 401(k) plans, he said.
Because the rising benefit costs conflict with the goal of retaining long-serving, experienced employees, companies must weigh benefit costs against tenure, evaluate both against the backdrop of their business strategies and potentially introduce changes, Mr. Schieber said. "Many companies could keep people longer" in a more cost-effective way, he said.
At the moment, for example, high-tech companies need "young, cutting-edge, absolutely current people," he said. "They don't want to tie up people for long. But this might change in the next century, when the workforce will grow more slowly."
If a company moves to a new business strategy, benefits then should be restructured in a way that makes them effective in retaining more people, Mr. Schieber said.
Benefit managers described different approaches in weighing the retention of longtime employees against the bigger burden on the benefits plans.
AT&T Corp. had reduced average job tenure through its downsizing efforts in the 1990s, said George Fromme, the company's director of benefits planning in Morristown, N.J. Offering employees voluntary packages to leave the company, AT&T knew it would "lose some experience," he said. "But we had to get rid of the head count." Also, "we were losing experience, but some (of that) was from the 'old world.' We need people from the 'new world.' It was a business decision," Mr. Fromme said.
Benefit costs did not drive the downsizing of Brentwood, Tenn.-based Murray Inc. in the early 1990s, said Russell Woodyard, vp-human resources. Although the company offered two early retirement programs as part of its downsizing, "the age of people has never been a consideration," he said. Rather, Murray pursued the goal of taking out specific layers of management, he said. Long-term employees cost more through higher salaries and their use of benefits that is "more than the average, maybe, but there is no substitute for (their) know-how and work ethic," Mr. Woodyard said.
Neither Mr. Woodyard nor Kenneth Pederson, global process leader for staffing and selection at Midland, Mich.-based Dow Chemical Co., analyzed the effects of age and tenure on their benefit programs.
Dow has progressively downsized over the past five years, but "we have a stated preference (by the chief executive officer) to have long-term employment relationships," Mr. Pederson said. One of the reasons was the nature of the industry, he said.
"Our kind of business takes a while to learn and become effective. . . .We spend quite a lot on employee development and training, and the returns on the investments are substantial," he said.
Free single copies of the study, "Have Jobs Become Less Stable in the 1990s?" are available by calling Watson Wyatt Worldwide at 800-388-9868.