The ageing workforce: practices and their effect on the financial performance of companies in metal industry.

The low birth rate, the increasing number of people older than 65 years and the low participation rate of older employees will cause problems on the labour market and within company. Companies will face problems to attract and retain employees and will face problems when the government decides to increase the retirement age of the employees. Employers then have to deal with employees that were planning to retire before their 67th year. If these employees cannot proceed to retire earlier because of financial reasons, this can demotivate and can increase their rate of absenteeism or decrease their productivity. HRM practices can help companies to fight these problems. These problems will have an effect on the financial performances of companies in the SME metal industry. The aim of this master thesis is to develop a (financial) forecast model that describes these effects of different HR practices on the financial performance of companies in the metal industry. We only investigate the effects on the productivity and the financial statement of those companies. In this study we identified practices on three different levels. On macroeconomic level we identified WIA and VPL. On mesoeconomic level the employer organisations and unions implement practices to face the ageing workforce problems. Within CAO agreement they recorded that employers have to offer employees a minimum of one day training, that older employees receive additional leave days, that older employees are not obliged to work shifts and that employees can receive an EVC-test on in each 5 years. On mircoeconomic level we identified five different HR practices: recruitment and selection policy, training, job design policies, policies to fight absenteeism and management policies. We used case studies to determine the effect of these practices. The results of these case studies indicate that the four companies are actively trying to implement practices that are suitable for their company and the employees. The outcomes of these case studies give an indication of the HR practices within these companies. Besides that we determined why companies implement HR practices. In the four case studies this does not always has to do with the labour productivity of the employees or their rate of absenteeism. This study shows that it is difficult for HR manager, supervisors or work council member to determine the effect of for example training on the labour productivity of employees. Our empirical study confirmed that there is a positive relationship between the HR practices and labour productivity and the rate of absenteeism (according to the four case studies). One remark that has to be made is that the effect of HR practices on company performances dependent on motivation and commitment of the employees. Finally, we combined all our findings in a financial forecasting model. We determined that the impact of practices on the income statement of a company depends on the labour productivity, salary, rate of absenteeism, pension arrangement and the age of the employees. We developed a forecasting model that predicts (using Markov matrixes) the expected changes within a workforce. We determined for each individual employees the probabilities that he/she will leave the company and linked these probabilities to the costs and benefits of each employees. These outcomes made it possible to forecast the effects of employees related costs and benefits on the income statement and balance sheet.