7 ways to engage retired and alumni employees as contractors
By Jay Lash
They have dedicated their career to your organization, so it’s time for newly retirees to dust off those golf clubs and move down to Florida—right? Not so fast. Managers in critical departments are finding that the legacy knowledge and functions held by these senior workers aren’t easily replaced by the upcoming workforce. Some industries, especially oil/gas, utilities, state governments, and financial institutions, are even struggling to find suitable employees to be trained and have critical knowledge transfer sessions with soon-to- retiree baby boomers. It’s an alarming trend, and many HR professionals are not aware of how often their alumni will need to return to the organization as contractors.
There’s another side to the story, however: The retirees aren’t as anxious to leave either. Their 401(k) funds can’t support their retirement needs like they forecasted and that house in Florida isn’t going to be purchased until they can sell the one in Peoria. But keep in mind, nearly retiring employees aren’t interested in the 60-plus-hour work schedules. They need more flexibility and time to pursue other interests. Many retirees would rather slow down than stop working altogether.
Is there a way for the aging worker and the organization to get what they both need? Many companies have initiated retiree programs that involve contracting with the employee. A great idea if done properly— and dangerous if it’s not.
Here are seven ways to safely and efficiently engage any returning worker as a contractor:
1. Execute a written scope of services. This document is critical in setting the stage for their return. It should include, at a minimum, specific deliverables, an end date, the agreed payment based on milestones, and a right for you to evaluate project before payment. Don’t forget that their return is more of a project then a continuation of their career.
2. Ensure that your benefits package specifically excludes contract workers. Most of the problems related to re- engagement of retired workers are connected to benefits claims. Look at your pension plans, 401(k), severance, and even the ACA. If your plan specifically excludes contractors, then the issue really is communications, and that’s what HR does best. Cover that in the exit interview and Cobra Insurance discussion.
3. Never include overtime, vacation, or sick pay in your negotiation. As contractors, these retirees will need to be treated as such, and they may think the same policies apply to their assignment as their old job. Negotiate a fair wage for the work, but HR policies and perks are different for a contractor.
4. Do not restrict independent consultants from hiring help. If you engage the retiree as an independent contractor, it is up to him or her to determine how their work will be done, including the hiring of individuals to help complete the project. This includes administrative help or someone to document their work. Try to refrain from assigning other employees to work for them or have anyone internal report to the retiree.
5. Have a knowledge transfer plan and understand intellectual property rights. The retiree’s knowledge needs to be transferred to the upcoming workforce, so have a plan in place and get it documented. In some industries, like manufacturing and energy, contractors may have done their jobs without a lot of documentation. The knowledge going out the door can be very costly, and if they are going to become a contractor, they can consult with your competition, so make sure you are covered. Keep your General Counsel in the loop; a non-disclosure agreement could be in order.
6. Direction and control should be reserved for employees.
Ensure the consultant controls where, when, and how they complete their project. Contractors, especially returning employee contractors, can be a co-employment risk, but if you clearly define the work and treat them like your other contractors, this risk is mitigated.
7. Educate your managers before they bring the retiree back to work. Again, communication is what HR does best, so include open communications about returning employees. Make this communication part of the worker’s departing interview, and when your managers are tempted to bring them back, make sure they know: Treat them with the new set of rules.
Clearly, the gold watch and great office party can still be part of retirement plans for your employees, but have a policy in place to invite them back if they are needed. Be sure to look at that engagement as a project and not a job. This is the best gift you can give the retiree, and their second career just might include helping their old employer out.
Jay Lash is vice president of corporate development for MBO Partners.