Future-proofing your business: How to manage the risks of Australia’s ageing workforce

The reality of most nations today is its ageing workforce and Australia is no different. As the country faces a demographic shift with a growing older population, Gallagher, a global insurance brokerage and risk management firm, underscores the importance of adapting risk management strategies to address the challenges and opportunities this change presents. 

With projections indicating a slower growth rate and an ageing population, businesses must assess and mitigate potential risks associated with an older workforce.

Australia’s workforce is ageing, and the effects of this shift are becoming increasingly apparent. By June 30, 2033, Australia’s population is expected to reach approximately 29.9 million, reflecting a growth rate of about 1.2%—a significant slowdown from pre-pandemic projections. 

The changing demographic landscape presents both economic challenges and opportunities. By 2050, the global population of individuals aged 60 and above is projected to double, reaching 2.1 billion.

In Australia, the trend of older individuals remaining in the workforce is pronounced. The participation rate for Australians aged 60 and over has more than doubled over the past two decades. 

For men in this age group, participation rates increased from 10% to 19%, while for women, the rate nearly quadrupled from 3% to 11% by April 2021. This trend is driven by several factors, including:

Increased Flexibility in Knowledge-Intensive Roles: Advances in technology and the rise of remote work have made it easier for older workers to remain employed.

Tighter Labour Markets: An increasingly competitive job market has led to longer working lives.

Improved Health and Education: Better health and extended education have enabled individuals to work longer.

Larger Mortgages and Later Family Formation: Financial obligations and life choices contribute to extended working years.

Casualised Workforce: The shift towards more flexible and casual work arrangements supports longer employment.

Business Risks and Considerations

From a risk management perspective, employing an older workforce presents unique challenges. Gallagher identifies several key areas where risks may arise:

1. Liability Claims and Duty of Care

Employing older workers increases the risk of liability claims related to duty of care and potential age discrimination. Businesses must ensure they have adequate employment practices liability insurance to manage these risks. Additionally, broader risk assessments are necessary to address age-related vulnerabilities. For example, duty of care obligations may necessitate adjustments in safety training, job assignments, and manual task designs.

Gallagher highlights the importance of clear health and safety policies to prevent regulatory and civil litigation. For instance, if an older employee in a noisy environment claims noise-induced hearing loss, the employer must provide sufficient evidence to demonstrate that the condition was age-related rather than a result of workplace conditions.

2. Age Discrimination and Legal Compliance

Australia’s legal framework does not impose a compulsory retirement age, making it illegal to force retirement based on age. Employers must navigate the fine line between realistic business needs and potential legal risks. For instance, if a 75-year-old employee wishes to remain in a client-facing role that involves selling products and services to a younger demographic, there may be concerns about a cultural disconnect. While there may be a business case for moving a younger individual into the role, such a decision must be handled carefully to avoid age discrimination claims. Negotiations and justifications must be approached with sensitivity and clarity.

3. Mergers and Acquisitions

The ageing workforce also impacts mergers and acquisitions. Under the Fair Work Act’s transfer of business provisions, buyers inherit the seller’s collective agreements when an employee’s employment is terminated or if the work remains unchanged. This means that businesses involved in mergers or acquisitions must be mindful of the implications for their ageing workforce and ensure compliance with legal requirements.

Best Practices for Managing an Ageing Workforce

Gallagher emphasizes several strategies for businesses to effectively manage and support an ageing workforce:

1. Implement Comprehensive Risk Management Policies

Develop and maintain comprehensive risk management policies that address the specific needs and risks associated with older employees. This includes updating safety protocols, job designs, and training programs to accommodate the physical and mental health needs of older workers.

2. Foster an Inclusive Work Environment

Create an inclusive work environment that values the contributions of employees of all ages. Implement policies and practices that prevent age discrimination and support diversity and inclusion.

3. Invest in Training and Development

Provide ongoing training and development opportunities for employees of all ages. This includes offering digital literacy programs, upskilling opportunities, and career development support to help older workers stay current with industry trends and technologies.

4. Develop a Robust Health and Wellness Program

Implement health and wellness programs that cater to the needs of an ageing workforce. This includes providing access to health screenings, ergonomic assessments, and mental health support to ensure employees’ well-being.

5. Communicate Clearly and Transparently

Ensure clear and transparent communication regarding policies, expectations, and changes affecting the workforce. Engage in open dialogue with employees to address concerns and provide guidance on navigating any potential issues