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I'm asking about companies'/managers' reasoning in general, rather than about the policy of a specific company. This is something I've come across a number of times, in/about various different companies.

Typically where the work being done by a particular 'role' is no longer needed, ceases to exist etc then the role/employee holding the role would be laid off / made redundant.

However... several times I've observed companies where an employee at the older end (e.g. age 60+) is in a role that would normally be laid off / redundant (legitimately, i.e. that role is no longer needed in the company and the person wouldn't be replaced) but the decision makers at the company opt to "wait for the person to retire" rather than lay them off.

The longest time period I've seen this happen over was about 5 years! (i.e. the person was 5 years from retirement but their position was already obviously no longer needed, due to changes in the company (mergers and acquisitions, 'synergies', etc).

  • There were several rounds of layoffs where numerous other people ended up leaving the company, but this person was not, surviving several rounds of layoffs, even though it was apparent to everyone that their role wasn't actually needed any more. (Not very good for motivation for those left behind!)
  • When the person eventually retired, they indeed were not replaced. There wasn't even any need for handover of any tasks (as the person wasn't completing any at that point).
  • (Edited to add, from discussion in the comments) There were several reasons the role was (in my view) obsolete, including: duplication of workload with the (acquiring) parent company; obvious lack of day-to-day tasks; my previous experience of seeing similar roles laid off; a "re-structuring" that preserved this role (and this one only) as an "exception" with no justification; job title/responsibilities had no bearing on actual responsibilities e.g. a "purchasing manager" who didn't have any purchasing workload.

My background is the UK, but this may apply to other countries as well.

Question: Why would the decision makers at a company "wait for the person to retire" rather than lay them off?

Things I've considered:

  • cheaper to continue paying their salary than severance payments? (but unlikely unless they have very long service and exceptionally generous contracts) - e.g. their salary may be another £30,000 (for example) * 2 years plus overhead for employers costs which could easily be nearly £100,000 - I'm sure almost no severance payments are that high!
  • compassion for the employee who would then struggle to find another job 2 (or so) years before retirement?
  • what about the effect on morale of the remaining staff members, who have seen colleagues laid off or lost their own jobs, when the company seems to be 'carrying' someone who is ostensibly not contributing anything.
  • I'm confused because layoffs are supposed to be about "the role", rather than "the specific person holding the role".
  • (edited to add:) perceived age discrimination? Laying off someone because they are 'older'? (but surely easy to disprove based on the facts about their actual responsibilities etc?)

In case it matters: my experience is mostly with "medium size" companies e.g. 50-200 people, the parent company mentioned above had over 1000 people.

user104682
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16 Answers16

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It's challenging to speculate about why particular decisions are made, even if you're able to observe directly - so, as a potential frame-challenge to your question, it's worth considering that you may not be correctly attributing a given decision to the right factors.

But generally, there are lots of reasons why management might make these decisions:

  • Keeping someone on payroll is a lot cheaper than dealing with a wrongful termination lawsuit. Even the most obvious redundancy has the risk of turning into a lawsuit, but people who will be especially angry about a layoff ("you're laying me off right before I retire!"), or who may fall under a protected status ("you're only laying me off because I'm old!") may be seen as too risky to lay off.
  • Keeping someone on payroll may change the regulatory requirements your employer needs to comply with. In many jurisdictions, there are laws that dictate how layoffs must be handled, and in some cases the requirements change depending on the number of layoffs - so, some "obvious dead weight" may be retained simply to keep the layoff under those cutoff points
  • Keeping someone who will retire soon on payroll may be a humanitarian decision, from the perspective of ensuring that employee doesn't have issues with healthcare coverage or access to a pension or other retirement benefit - in many cases, getting laid off only a year or two before naturally retiring can be devastating, compared to getting laid off when you're a long ways from retirement and have time to recover. This challenges your assumption that layoffs are "about the role, not the person" but decision makers don't always heed the assumptions of their employees.
  • Even if it appears that there's redundancy, or overlap, between one person's responsibilities and those of another employee or team, there may be reasons to keep the extra capacity - maybe there are performance issues with the other party, or the work is seen as risky so it's worth keeping extra bandwidth, or some other extenuating circumstance that justifies more capacity than it takes to complete the actual tasks on hand.
dwizum
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    I upvoted your answer and appreciate your insights, so this isn't a criticism of your answer, but ugh! Being driven by risk-aversion (points 1 and 2 - and 4 to some extent) rather than actually dealing with the facts! – user104682 May 14 '19 at 20:06
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    Welcome to corporate life! Risk-aversion is a major factor in decision making. In fact, understanding and balancing risk is probably where the magic (both good and bad) happens, rather than making decisions on face value. Also - to be fair, and with respect, when you say "dealing with the facts" we have to consider that you're a third party to the specific situation you're referencing in your question, so you're not really privy to the actual facts, much less whether or not anyone is paying attention to them. – dwizum May 14 '19 at 20:28
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    About the "humanitarian decision" - even if they were just cold calculating machines uncaring about what happens to the ex-employee, firing someone just before retirement will have a bad effect on morale, and if word gets out, they will probably have worse chances at hiring in the future. – Val May 15 '19 at 04:36
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    @user104682 avoiding risk IS a large part of running a business, that's a fact... – jwenting May 15 '19 at 06:48
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    @user104682 "Being driven by risk-aversion .. rather than actually dealing with the facts" - the thing about the future is, there aren't any facts. Only probabilities. Or risks, to use another word. – AakashM May 15 '19 at 07:58
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    I also feel morale plays a major part, as @Val said. If you see people actually getting to retire, instead of being kicked out, it increases the morale of the remaining employees regardless of whether they themselves will retire soon or decades later. If almost-retirees are fired, it might give a push for other employees to start looking for a new employer, as clearly the current employer does not care about employees. – Juha Untinen May 15 '19 at 08:51
  • @user104682 The ever present chance of consequence is mathematical, so I do not understand your reasoning. Risk aversion is far from being emotionally charged. – lucasgcb May 15 '19 at 09:16
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    Good point about regulatory issues - the WARN act of 1988 covers some instances of mass-layoffs. It's possible that a company wants to keep the number of layoffs low enough to not trigger the requirements of that law. – Robert Columbia May 15 '19 at 12:00
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    @Val I second the morale aspect - demonstratively keeping an employee for a year or two before retirement when their role is no longer needed seems a very good investment to me (more so if the employee had been with the company for longer period and had already earned the company much higher monetary value than what retaining them would cost in their pay). – Pavel May 15 '19 at 12:17
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    Also, near-retirees can often be an incalculable wealth of experience and can continue to provide mentorship and guidance for the people who will be replacing them. Even if they're not saturated with work, their ability to continue to cultivate development in more junior employees should not be overlooked. – J... May 15 '19 at 12:18
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    @RobertColumbia The specific context of this question is the UK - so obviously US law does not apply. However, UK law generally provides far greater protections to employees - see my answer for some details – stuart10 May 15 '19 at 13:21
  • FWIW, I purposefully left the second bullet generic because the OP indicated, "My background is the UK, but this may apply to other countries as well." The WARN act and the points in @stuart10's answer were what I had in mind, in general. – dwizum May 15 '19 at 13:24
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    @user104682 making decisions out of risk aversion is how the world works. Why do you get insurance? Insurance is all about tucking aside some money in case some terrible event happens, which will probably never happen. Same thing in the corporate world. Being sued for wrongful termination based on firing a protected class can be dangerous to a company. Even the allegation can hurt the company's reputation. We hear about corporate scandals in the news all the time and jump to conclusions of guilt when none of us were there to witness the facts. – Brandon May 15 '19 at 13:39
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    "Being driven by risk-aversion rather than actually dealing with the facts!" With respect, that's a pretty naive viewpoint. Successful businesses don't continue to be successful by ignoring obvious risks. Preparing appropriately for known risks is one of the most important things a business can do--and is a very smart thing to do. A business that accounts for known risks is not necessarily "driven by risk-aversion." A properly run business will not be timid, but also not reckless. – GrandOpener May 15 '19 at 18:00
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    The last point ties into what is often called "the bus number" in computer and tech circles: what's the smallest number of people can you suddenly lose ("got hit by a bus") before you're really screwed? If only one person can do a particular task, you have a bus number of zero: lose that guy and nobody can do the task and the company/division/whatever can't complete its job(s) without a lot of extra time and money (if they ever even can). Redundancy ups your bus number above 0, and that's always desirable. The cost of the redundancy is far less than the cost of Mr. Irreplaceable being lost. – zibadawa timmy May 16 '19 at 10:35
  • Echoing many, morale is a huge factor here that really should be added to this answer. Even if the company is ruthless and cares not at all about “humanitarian” concerns, its employees almost-certainly will, since they can easily imagine themselves as the “human” in question. It is no great leap to go from seeing a peer being mistreated to expecting you will be as well, and from there starting to think another employer might be better for your own interests. Assuming the company has at least some employees it wants to keep, employees getting the idea that they’d rather be elsewhere is bad. – KRyan May 16 '19 at 15:38
  • In my experience, having been on both the giving and the receiving end of layoffs, "morale" is very elusive - and it's hard to base decisions on it, since no matter what you do, someone who disagrees with you will be unhappy. As you're describing, it may seem like it will boost morale to not lay off everyone's favorite old guy even if his position isn't necessary, but on the flip side - as we see here with this OP - some employees may think "why are all these other good employees getting laid off, when that old codger is left with a paycheck even though he doesn't contribute?" – dwizum May 16 '19 at 16:25
  • Further, if you want to preserve specific employees, or you want to boost morale among the people you ARE keeping, it seems like the standard practice is to offer them retention packages. People suddenly care less about who else is getting laid off or not if they're being told "you're highly valuable, we want you to stay, and here's a few thousand dollars." – dwizum May 16 '19 at 16:27
  • I saw a similar case personally. An entire IT team (most were 55+) was laid off because new management wanted to outsource them. In 6 months they could not find a good company to outsource the work to and they had to hire another 2 IT guys to replace the original team. One of the original employees accused them for the termination being illegal and they had to make him an employee again and pay 6 months of work. – Sulthan May 17 '19 at 11:51
  • You can win Lotto and get less money than some redundancy payouts for older workers, and their tax breaks may be considerable. Just the chance that there may be a redundancy can keep people holding out rather than making a change. This has an impact on natural attrition rates. In addition, many companies bend over backwards now to demonstrate "diversity". Keeping them on (along with other soft benefits) can save having to make a "quota" hire. – mckenzm May 22 '19 at 05:21
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You seem to be thinking of this from a very cold perspective. That's probably a good way to get into the "mind" of a corporation, but since the decision-makers are actual people they may not respond quite that way.

For example, your point on morale suggests that morale would be higher with larger and more intense layoffs than with smaller, less aggressive ones. People are unhappy with huge layoffs. With those two options, I know that I'd be happier working for one making the latter choice rather than the former.

Anyways, there will be lots of potential reasons and they will vary by employer and situation. Some possibilities:

  • Optimism about transferability of skills. Some employees may have a bit more flexibility in what they can offer the company for their salary. A decent manager probably has some broadly applicable skills and can transition to new work still useful to the employer, while a coder specializing in legacy systems using an otherwise deprecated language might not be as easy to reassign if those legacy systems are retired. Whether or not those transitions are executed successfully isn't relevant to the expectation that they might be at the time of deciding who gets laid off.
  • Decency. This varies a lot from person to person, but on average if someone is a couple of years away from retiring (at the typical retirement age), laying them off may be a death sentence for their career. It's hard to get hired as you near retirement age, and suddenly losing stable income and being forced to take whatever stopgap jobs might be feasible can be the difference between a comfortable retirement and an unstable, hand-to-mouth end of life. These issues are not as acute for younger workers, though other issues may exist.
  • Legal exposure. Whether or not the conclusion is actually correct, a layoff that forces out a disproportionate number of older employees can be credibly described as age discrimination. Since job responsibilities and department roles can be changed to suit the employer's needs, it's hard to prove that age discrimination wasn't the reason. Even if such a thing could be proven, the costs of a lawsuit can quickly become exorbitant.
  • Severance. This one varies a lot by situation as well, but laying off an employee means you'll get absolutely nothing from them going forward, but will still have to pay some portion of their salary in severance payments. It may well be more cost-effective to employ someone for longer, paying somewhat more than the severance amount, and get more than nothing from them in return. It won't always be the case the numbers would work out that way, but it could be a factor in some firms' decisions.
  • Institutional knowledge. Employees that have been with a company for a long time (not necessarily near retirement age) are likely to have gained a lot of institutional knowledge, information about how the company operates under various circumstances, what its needs are, and so on. Even if it doesn't touch on their old job description very much, it's possible that their insights could be more valuable due to that knowledge.
  • Personal loyalty. People build relationships over time, and if an executive with influence over distributing layoffs likes someone, they may put their thumb on the scales to protect that person.
  • Imperfect efficiency and fungible needs. Companies are not perfectly efficient, before or after layoffs, and even if it's possible to make a case that an additional job could be cut that doesn't meant that that job must be cut. If you could justify cutting positions A and B, but the needs the layoff is addressing require only one of them to be cut, then the laid-off person will have a valid-enough complaint that the other position remains. That person would not be better off with both positions being cut, and the company itself might not be either.
  • The purpose of layoffs. Layoffs are not about "the role" or "the person". They are about overarching financial and competitive needs, which a layoff may help address. The company is cutting staffing in pursuit of a specific goal, and as above that goal does not necessarily involve minimum possible staffing. Reaching that goal may or may not involve eliminating those jobs and employees which you, user104682, happen to value the least.

There exist many possible other reasons, including exotic ones like "the employee has blackmail material on the person that can lay them off". The generic answer to this question is that "those companies feel that the best decision involves not laying off such individuals, for reasons that are specific to that company".

Upper_Case
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    My point about "morale" was more about the way that (as it was presented) the company has to make difficult decisions, it will be hard for those remaining as they need to pick up extra workload, etc. after the people have left -- and of course the more subjective factor of 'losing' people they'd built up relationships with over a long period, but ultimately understood in some sense that the company can't afford to keep everyone. And people can be "stoic" or accepting about that. But then here's this person who the company seems keen to protect, for no apparent reason. – user104682 May 14 '19 at 20:35
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    @user104682 Morale is complex, and I'm not making a definitive statement about how people definitely will or must feel during a layoff. I'm only pointing out that, while the situation you describe is perhaps not great for morale, a larger-scale layoff is unlikely to be better. Layoffs are usually pretty arbitrary in how job cuts are distributed, and that's not a secret to employees that remain. One arbitrary choice is not necessarily worse than another, and employees that remain post-layoff are often mostly happy to still have jobs themselves. – Upper_Case May 14 '19 at 20:38
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    Gets my upvote for "institutional knowledge". Just because someone doesn't appear to complete regular tasks doesn't mean they don't provide input. A very experienced or long-term employee might save the company tens of thousands of dollars by answering a single question. This is why consultants are highly paid and why retired employees are often brought back to consult. – Bloodgain May 14 '19 at 20:40
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    I'd put severance in that list too... depending on the jurisdiction companies may be required to give severance proportional to the employee employment duration which, if it's something like 40 years, can yield very high severances and if the company is laying off they may not be in the financial situation to give 100-150k to old employees and prefer to simply pay them a couple more years hoping to be more financially sound at that time of their retirement. – Bakuriu May 14 '19 at 21:49
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    Depending on the person, it may be a boost in morale too see that the company is treating this person, who would be in a much more difficult position if they were laid off, with some deference. They could even "selfishly" reason that "hey, maybe this means they would have my back if I were in a similar situation". I know of a situation where a person voluntarily put himself on the layoff list in place of an immigrant who was in the process of getting permanent residency in the country. People do make exceptional decisions when they see exceptional circumstances. – msouth May 15 '19 at 04:59
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    "institutional knowledge" if that guy retires he takes that knowledge to the grave. If he gets sacked he can take that knowledge to the competition. – RedSonja May 15 '19 at 06:40
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    @user104682 re: "they need to pick up extra workload" - in that case, is there a true redundancy? – GalacticCowboy May 15 '19 at 16:29
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    @BloodGain: Anecdote time. I remember working with a colleague (programmer) who had been working for the company for at least 10 years. Honestly, he was a very mediocre programmer; yet, he was a very valuable team member. Why? Knowledge. He had worked for multiple teams, in multiple departments, so whenever there was a question about that department he either knew the answer off the top of his head, or knew someone who knew. He knew why the software we built was important: who used it, how they used it, ... Despite not being a great programmer, he may have been the most invaluable team member. – Matthieu M. May 15 '19 at 18:08
  • @MatthieuM. I believe it. I've worked with a ton of people in my industry like that. Most of my 10+ years of SW dev experience have been in this industry, and I often find myself quite surprised at how much ancillary knowledge I have in it. – Bloodgain May 17 '19 at 04:13
  • @GalacticCowboy It was in the context of the overall layoffs (of which it was a large number of people at a time, not just one or two) e.g. if you have a team of 5 "Widget Makers" and due to the amount of business you only have 3 "Widget Maker" positions in the new structure, you'd have to lay off 2 of them (based on some fair selection process presumably) but some of the outgoing 'widget' work (e.g. filling in forms after the fact) could then get re-assigned to another department like "widget admins" who would then have to pick up some extra tasks. In this case the guy is just "himself" tho. – user104682 May 18 '19 at 17:10
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In addition to the other answers which contain many true things, these "old timers" often have soft contributions that are difficult to measure, but which are important. Some examples depend on the exact role they have worked in:

  • They may have long-standing relationships with customers, which are useful intermittently and hard to replace
  • They may have deep knowledge about certain parts of the company, be they process or legacy systems or etc., so can function as a knowledge source
  • They may have a particular, highly specific skill which is useful rarely but effectively, and is hard to replace (and perhaps not worth replacing, but worth taking advantage of if you have access to it)
Richard Rast
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    Very true. Many places I've worked, people getting close to retirement were often allowed to move to reduced hours, or reduced numbers of days per week. This is generally good for the employee, who doesn't have a sudden step-change in their lifestyle (and finances!); and good for the employer, who still has access to their institutional knowledge at a reduced cost. – Graham May 15 '19 at 14:00
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Basically, because not all business decisions are made with a ruthless eye on only the bottom line: some are made with a sense of compassion and humanity. If keeping the obsolete worker on roll would bankrupt the business, of course the old guy would generally be out of luck. But in human terms that desk and that salary may be worth a lot more to him than it is to the company. He’s not hurting anything, and he might contribute experience or tribal knowledge. Some managers would be glad to just let him run out the clock.

Ernest Friedman-Hill
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    Also it is hard to tell from another point of view what that individual is providing. – Ed Heal May 14 '19 at 19:30
  • While I agree that not all business decisions are made ruthlessly, what makes the decision of laying off a near-retiree more likely to be made with humanity than any other decision a business makes? – raumkrieger May 14 '19 at 22:18
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    Maybe the decision-makers don't want to work for a company who unceremoniously sack people near the end of their careers. After all, those decision makers will also come to the end of their careers one day. What goes around comes around. – O. Jones May 16 '19 at 11:42
  • It seems almost like a kind of "reverse age-discrimination" to me though, in that if I (as a 28-year-old professional with 8 years of experience in my field but nowhere near retirement yet) were in that position, I'd be laid off. But the "old guy" keeps the job on the basis of his age, rather than anything objective about performance, contribution to the company, etc. We can't make decision to hire someone because they're too old/too young so I don't see why (assuming the layoff is genuine) someone can be protected just because of their age? – user104682 May 18 '19 at 17:15
  • @user104682 I don’t think we’re really talking about keeping the old guy and laying off the new guy; that’s not what the OPs question was about, really. He was asking about keeping the old guy when his job is redundant. If you had an old guy who literally had no relevant skills and a new guy who did, and you needed to save money by losing one guy, it’s a rare business that wouldn’t lay off the useless guy. Now, one thing to remember: the new guy who knows the new frameworks always overestimates the value of this specific knowledge to the business. – Ernest Friedman-Hill May 18 '19 at 22:34
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Sometimes it's just the decent thing to do. If a person has given a large portion of their professional life to the company, its not unreasonable to treat them well.

When a 60 year old is laid off, do you believe it's easy to go find work? A company that believes in treating their people well is a good company to work for.

Keith
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    Also it brings the benefit of attracting potential employes who appreciate a good employer – Martin May 16 '19 at 08:13
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In many jurisdictions making someone redundant is somewhat hard - deliberately so - precisely to protect employees from unscrupulous employers.

Some of the UK (your location) specific laws are summarised here

In short, for a hypothetical 65 year old employee who has been employed by the company for 20 years, they will be legally entitled to:

  • 12 weeks notice
  • 30 weeks redundancy pay or £15750 (whichever is lower)
  • Consultation with the employer on their redundancy - for larger redundancies (>20 people) there are specific rules on how to do this
  • A right to suitable alternative employment (if it exists)

These are minimum legal requirements. Many contracts will come with provision (well) beyond this, possibly as an inducement to potential/current employees, a result of negotiations e.g. with a trade union, or to protect the employer.

Therefore it can quite often cost a surprisingly significant amount and take a surprisingly long time to make someone redundant, if you are even able to do so. Companies may then make the judgement that it is better to allow someone to work to retirement, especially when you accont for the factors mentioned in the other answers.

stuart10
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    Especially if the contracts have increased severance requirements for layoffs vs retirement. In that case it can be cheaper to keep paying the employee rather then to lay them off – Magisch May 15 '19 at 08:59
  • This is the correct answer. It costs a lot more to make someone redundant than to let them retire. After big mergers a lot of people will hang on trying to get the likely redundancy pay, rather than quitting and getting nothing extra. – OrangeDog May 15 '19 at 12:08
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    Note also, that this is the statutory minimum and it's actually fairly common for staff to have rights to higher payments. – Jack Aidley May 15 '19 at 12:46
  • I had considered the 'comparative costs' element but couldn't think of any way it is cheaper to pay redundancy/severance than another couple of years salary - assuming the person isn't just 2 months (or whatever) away from retirement! I think you are right though, that if their contract goes back 20 years or something I expect provisions for redundancy payments are a lot more generous than now. Starting a job now, contractual redundancy provision is generally in line with statutory! – user104682 May 18 '19 at 17:18
  • @user104682 Entitlement beyond statutory is still common in many sectors. E.g. if an employee is considered to have commercially sensitive knowledge long notice periods (6+ months spent on gardening leave) are common to prevent said employee taking that info to a competitor (I believe non-compete clauses are unenforceable in the EU). – stuart10 May 20 '19 at 07:23
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One conception of a company is to provide for its employees. Americans often think of companies as having a singular goal: profit. But even then, profit for who? Sometimes companies focus on profits for employees rather than for a CEO or stock market investors. If the goal of a company of people is to provide for said people, of course you'd prefer retirement. Another way to think of it, some companies are in the business of society building. Profits for the 1% and gruel for the rest is not the only to run a business.

djeikyb
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  • My experience unfortunately points to this mostly being fictional. +1 nonetheless – IT Alex May 16 '19 at 13:34
  • yeah i think more often there is the occasional leader who thinks this way, rather than the whole of the company aligned as such. and often the companies that do behave this way have been forced to – djeikyb May 16 '19 at 21:58
  • @ITAlex have seen very employee driven and oriented companies. The ones I know are typically smaller ones where often the CEO(s) come from the same background/went through the same jobs as many of their employees. – Frank Hopkins May 17 '19 at 09:29
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    Publicly held companies are essentially required to maximize shareholder profit. But privately held companies can do anything they like, and (especially smaller ones) often have goals other than maximum profit. Taking care of employees is one such possible goal. – fluffysheap May 17 '19 at 17:47
  • For what it's worth the companies I've seen this happen at were about 50/50 publicly held and private. – user104682 May 18 '19 at 17:19
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Continuity of institutional knowledge. It really matters when you have someone who understands every aspect of your business, and how all the pieces interact, and what's gonna move if you pull a string. Inexperienced people will blunder around and make a lot of costly mistakes, that the old guard could say "In '93 when we tried that, this is what happened."

For instance, google "strang yard meltdown". Strang was a small railyard in Houston that specialized in serving local plastics plants. Southern Pacific tried to shut it down and serve everything out of their main yard. Trains instantly backed up, and SP very quickly realized their error and fixed it. Ten years later, Union Pacific bought SP and fired all the old-guard.

Tenure, pensions, and retirement. In large companies and government, companies would provide a lot of support to career employees when they retire. To fire someone before they fully vest in these programs cheats them out of a fortune. And it's is a virtually guaranteed wrongful-discharge suit with so much money at stake. It's thought to be cruel and sadistic, when other options exist, such as laying off an expendable intern or contractor, and putting the elder on the job.

Harper - Reinstate Monica
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One thing I haven't seen mentioned in other answers, Karma.

If you feel as though you may yourself reach this point later in your career, having a track record of getting rid of people near retirement age because they are no longer necessary may come back to haunt you.

Fostering a culture where those near retirement age and have been with the company for a while are kept on the books until they reach it is smart from a self preservation perspective, as well as those reasons already mentioned in the other answers.

JMK
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Given increased life expectancy and acute shortage of skilled labor in many industries, it is more beneficial for employers and society at large to retrain older employees instead of just laying them off.

Also in many countries in continental Europe, what you have suggested may be impossible thanks to trade unions or even illegal to do so.

The inability of older employees to be as productive as younger ones are often exaggerated - societal prejudice often encourages older employees themselves to give up too easily I guess

kube_ahmed
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    Mentioning unions is a good point, many workers in the UK are unionised and letting someone go so close to retirement would likely result in a long legal battle, not just with the single employee, but with a powerful and well-financed trade union – Lord Jebus VII May 15 '19 at 15:10
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To add to dwizum answers, a couple more suggestions :

  • Perhaps he or she might have political support higher in the company for keeping him or her in the payroll

  • Perhaps he or she is expected to resign ? A sadly common practice in France for employers with older staff, in order to avoid paying costly packages, is simply to shunt aside employees leaving them with no work to do and expecting they would give up and resign (this is considered harassment, but doesn't prevent the practice to exist).

Diane M
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In addition to the other answers: It makes the decision easier.

When you will eventually get rid of the position, but you do not know when, it is easy to couple this with "When X retires, we will not get a new person for the position".

This may mean, that you pay a bit longer than needed for the position, but on the other hand you avoid the risk for being responsible for a layoff that causes trouble because the person did things that were still needed. When the person retires, it is not your decision that caused this trouble. Of course you may be responsible when you did not get them to coach others, but it is way harder to blame it on you.

allo
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There is a simple financial reason. Laying people off entitles them to redundancy pay in the UK, which is often quite a lot for older employees who have built up many years of service and have high salaries.

If they retire they get nothing, the pay-out is only if they are made redundant. So rather than pay out a lump sum in one hit, which could easily be more than a year's salary in some cases, they simply wait for them to retire and make the best use of their labour in the mean time.

user
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I see two additional reasons not yet mentioned (not the way I am presenting them):

  • the labor productivity of a given single person is not linearly related to its payroll. In many domains (including software development), a person A can be 10x time more productive than a person B, but costing just 1.5x times as much as B. To say it in other words, the statement that there is an efficient job market is an illusion. Things are much more complex in real life. The job market is not entirely economically efficient. And productivity is hard to measure: a person apparently not doing anything directly useful could be very productive to a corporation -or just a team- as a whole (e.g. because of know-how, soft skills, implicit corporate memory, informal knowledge transfer to younger staff, etc....). At last, for a given single person C during its corporate lifetime, its individual yearly productivity is only weakly correlated to its pay in the same corporation. In France, most persons reach their peak individual productivity around the age of 45, but many of them stays in the same corporation after that, and still have a small payroll increase.

  • this is obvious, but often unstated: the goals of any corporation is not only, and cannot only be, short term profit. In other words, the capitalistic system is also an historical illusion or simplification. If capitalism was a faithful explanation of history, there won't have been any wars! Corporations are human organizations, and their goals are complex (one of their obviously unstated goals is to satisfy the egos of managers; read also about self psychology and metacognition)! Read also the famous Bullshit jobs book (very related to your question), and if you read French, La comédie (in)humaine.

To summarize and simplify caricaturally, our human species Homo Sapiens Sapiens is much more than, and certainly different of, the Homo economicus we pretend it is. This is basic economics. As a scientific field, neuroeconomics try to study that.

PS. History is tragic. That is a very well known fact, which is known since the ancient Greeks (Plato at least). As an European who will have to vote soon, the misunderstanding of that fact is the most important thing I am criticizing in the entire current European political class. Capitalism -as an economical system- is an illusion, even if it is a convenient one. The implicit ideology of the European Union is the end of history, and that is a very dangerous illusion: and as a grandfather I am explaining to my teen-ager grand-children that they might see a war in Europe in several decades.

Basile Starynkevitch
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    thanks for sharing "Bullshit jobs" link. Where I disagree there is the impact of not having a job on crime rates and in turn on societal well being (busy people even if busy with "pointless work" usually have less time for any crimes) – kube_ahmed May 17 '19 at 10:17
  • Yes. I don't agree with everything in that book. But it was really exciting to read. In French, there is also La comédie (in)humaine. That book is worth being translated to English, or, if you happen to read French, is worth reading too! – Basile Starynkevitch May 17 '19 at 10:23
  • @senseiwu: On the other hand, please notice that most retired persons are not criminals (I'll be retired in 3 years, and I don't believe my probability of making crimes would increase). And being retired is not an excuse for blood crimes (at least, not in Europe). – Basile Starynkevitch May 17 '19 at 10:26
  • I agree there - retired persons usually pursue leisure time with family or friends we can hope. But the book suggests to get rid of receptionist jobs which are taken by 30 somethings and govt. feeds them. I am somehow appalled at such an oversimplification, oversimplificn. to the extend that author assumes that young healthy, often unqualified people doing mundane jobs would automatically start pursuing creative jobs (didn't they have roughly 20-25 years of education phase where they could decide on this?) – kube_ahmed May 17 '19 at 10:29
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    I agree with you on that. The book is still thought-provoking : it makes an excellent analysis of the problem, even if the solution proposed there are oversimplifying. The La comédie (in)humaine book is symmetrical: less focused on the problem, more on possible solutions. They are complementary books – Basile Starynkevitch May 17 '19 at 10:52
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Another important observation in the UK context: there is no compulsory retirement age, and it is illegal for an employer to insist upon somebody retiring by reason of their age (unless they have made provision for an Employer Justified Retirement Age, but such provision is an exception and must have a very strong legal defence). Consequently, the employer may not know if/when a given employee will retire. So, by "waiting for the employee to retire", the employer is taking a gamble on how long they will have to wait. If they are taking the gamble, that suggests that they think they will not be waiting for very long.

anon
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As history has proven, time and again (and again, and again, and again), any regime, that includes corporations as well, that is exceedingly ruthless performs very poorly. The reason for this is that humans are conscious and self-aware creatures capable of analyzing the past, approximating the future and empathizing with other conscious creatures.

The difference between mediocre corporate existence and brilliant history-changing corporate success relies on people having high morale and being able to identify with the entity they work for: it was true for the kings of old, it is true for CEOs as well.

It is a well-known fact that the greatest leaders, who made their people perform near-impossible feats that echo through the ages as a testament to the indomitable human spirit, cared deeply for their people and were respected rather than feared, and even if they were feared, they were also deeply loved by their people.

You keep the old-timers until the retirement age in recognition to their service to the company they performed through their lifetime. It makes you seem a just and fair ruler (a manager, a CEO) and prevents all your top talent at the peak of their professional performance (ages 40 to 50) to abandon you to seek employment with a more humane company.

Not only that: human beings are highly empathetic creatures and retaliation is a survival mechanism that we evolved to teach a lesson to those who would trespass against us. I have seen it more than once that a key personnel would quit at a moment designed to inflict the maximum damage, to teach a lesson to a particularly disliked manager (a hopefully get him/her fired). I have also seen people, who after finding a new job would actively seek to damage their previous employer (for example divert the sales to the new employer).

Remember: the more talented an employee, the easier it is for him or her to quit and find a new job.

Respect and loyalty is something that has to be deserved, you never just get it because you want to. One of the biggest failings of the modern education system on all levels is that it relies almost exclusively on individual work and achievement and on objective metrics. It teaches nothing about the fact that out there in the real life you are only as good as the people willing to follow you.

Smiling Shadow
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