Older workers, more cost for companies in developed regions

Companies in developed regions are getting more top-heavy. Older workers are staying in jobs longer, and employers are emphasising experience over youth. The result: Younger workers are having a tougher time finding work, and, particularly in Europe, companies’ productivity measures are at a five-year low, according to a new PwC report.

Per-employee costs in Europe equate to about $55,000, up nearly 16% since 2009, according to Key Trends in Human Capital 2012, which examined data from 2,400 companies in more than 50 countries. The report concludes that companies must use better performance management techniques to assess value.

Companies are getting a lower human capital return on investment (HC ROI), an analysis of pretax profit produced for every pound, euro or dollar in compensation and benefits. Employers in Western Europe, for example, have a 1.1 HC ROI, the equivalent of $1.11 in revenue for every $1 invested in an employee. In the US, the number is 1.34, and the number grows higher in emerging regions. Asia Pacific has an HC ROI of 1.7, and Latin America’s measure is 3.4.

Older workers are staying in jobs for several reasons, including poor investment results in their retirement savings. Some are continuing to work because they are supporting unemployed adult offspring.

The report also shows a greater emphasis on older workers. One segment of the report, a survey of more than 1,200 chief executives, shows that 55% in Western Europe and the US rate the recruitment and retention of “high potential middle management” as a key challenge, compared with 32% saying the same for “young workers.”

“Cutting the recruitment of younger workers means they are paying out much more for their workforce for less return,” Richard Phelps, human resource services partner at PwC, said in a press release on the report. “The difficult job market means many experienced workers are staying longer in jobs, leaving companies struggling with top-heavy structures, little staff turnover and rising wage bills.”

The report also showed:

• Seventy-eight per cent of chief executives plan to make changes to talent strategy in response to the global business environment.

• Thirty-one per cent of chief executives said talent constraints had hampered innovation at their organisation.

• Thirty per cent of chief executives said they were confident they would have the talent they needed to grow their organisation.

—Neil Amato (namato@aicpa.org) is a CGMA Magazine senior editor.