Organisational change: impact on early retirement

Motivating older employees to stay working longer is seen as a key way of tackling the current pensions crisis facing many countries. Something of a fly in the ointment for those looking to address the problem is the option to take voluntary early retirement, especially where among those who are in good health and best placed to continue working. Dr Nina Breinegaard and colleagues at the University of Copenhagen have been researching the situation in Denmark and, as Nina explains here, they find that a key area of focus for employers and policymakers could be organisational change.

A whole host of things influence our decision around when to retire. These include obvious things like our finances, the state of our physical and mental health and what’s going on with our family and close friends.

Another key influence is what is happening in the workplace. A job may have become too physically demanding for example. A number of studies have shown that when a company is restructuring or downsizing, employees may feel less secure about their position. This in turn can be a catalyst for early retirement, sometimes on the grounds of ill health.

In our research, however, we wanted to try to get to the bottom of how organisational change might influence those without any health problems to retire early. We also wanted to take a close look at the combined influences of the psychological and social sides of work on that decision.

Claiming benefits

In Denmark, men and women who have paid into an early retirement benefits insurance fund can claim those benefits between the ages of 60-64 even if they are in good health. At the end of 2012, 34 per cent of women and 27 per cent of men aged 60-64 received these early retirement benefits.

We linked Denmark’s DREAM database, which collects information on all public benefit payments, with a survey collected over a two month period in 2011 from more than 28,000 public sector workers. This enabled us to look at which employees decided to take early retirement benefits and whether changes at work were linked to that decision.

All this information was then linked to administrative data to take a range of social and economic background factors into account.

We ended up with a group of 3254 employees aged 60-64 who were entitled to early retirement benefits. Details of any changes at their workplace: a change of manager, a merging or demerging of departments or workgroups, moving to a different office or having a new base, were collected independently from current or previous managers.

They also rated the quality of their work environment e.g. how good their managers were at leading, how positive relationships were with other colleagues and how fairly and well concerns and conflicts were dealt with (organisational justice). The answers to all these questions were then used to create overall scores for each employee’s work environment.

Follow-up

When we followed up with our survey participants, we found that one in five women and one in seven men had taken early retirement benefits with early retirement being common in all occupational groups except for doctors and dentists.

65.1 per cent of the 2206 employees for whom we had information about all types of organisational change had experienced one or more changes. Change was most frequent among social and healthcare workers (74.9 per cent) and least frequent among laboratory technicians (46 per cent).

Employees whose workplace had undergone a change of management or a merger were much more likely to have taken early retirement than those who had not. After taking background factors including age, marital status, gender etc. into account where a change in management had occurred, the likelihood of early retirement increased even more. Adjusting for the same factors for those whose workplace had experienced a merger made no difference to the likelihood of early retirement.

Relocation was linked somewhat less closely to early retirement and the demerging of departments or workgroups had no effect at all.

On their own, poor quality work relationships and networks and low levels of organisational justice were also associated with early retirement. How well people felt they were managed had an effect only once background factors (apart from age) were taken into account. When any organisational change was factored in as well as the quality of the work environment variables, the likelihood of an employee retiring early increased further.

Organisational change matters

Taking everything into account, we can say, for the first time, and with considerable confidence, that when it comes to early retirement, organisational change makes a difference, particularly where it involves a change of management. Organisational changes on top of a work environment that is perceived to be poor compounds the likelihood of an employee retiring early.

Given that our research focuses on people who are not retiring because of poor health or disability – the very employees that organisations and policy makers want to encourage to work for longer – our findings are likely to be of considerable interest.

Key would seem to be careful consideration of the impacts of any restructuring within a business or organisation. Improving the workplace environment could also have a role in reducing the numbers of employees calling time on work before the age of 65.

The frequent occurrence of organisational change in the Danish healthcare sector is interesting in the light of medical doctors, nurses and other health and social care workers recently being identified as shortage occupations in Denmark. Managing those changes and improving the working environments of people working in these occupations could be a priority, not least because ageing populations not just in Denmark, but the world over, clearly need these groups of workers more than ever before.

Organizational change, psychosocial work environment, and non-disability early retirement: a prospective study among senior public employees
 is research by Nina Breinegaard, JH Jensen and JP Bonde and is published in the Scandinavian Journal of Work, Environment and Health.

Photo credit: Workers, Justin Lynham

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