For years, conversations around new generations entering the workforce have been framed negatively. This isn’t anecdotal. A survey of 4,000 workers in the UK, US, Canada, Australia and Germany is just one example of people noting frustrations with colleagues in different generations.

Yet the tide is already turning on such conversations. With Gen Z now accounting for 25–27% of the global workforce, negative perceptions are increasingly recognised as outdated and unhelpful.

Indeed, Gen Z does want to play an integral role in workplaces and are keen to be present at the office to build relationships with colleagues. More than a third of this generation (37%) fear losing their job, more than any other generation, no doubt impacted by the emergence of AI hitting the availability of entry-level roles. Though given that Gen Z could be best equipped to harness the power of AI for employers, people are increasingly seeing the benefits of multigenerational workforces.

Time for refreshed talent strategies

Employers cannot afford to ignore changing workforce dynamics. The workforce is contracting; it is projected to be 25% smaller in two decades in Europe. At the same time, skills gaps are widening and businesses must consciously appeal to diverse age groups to address skills gaps.

Faced with rising costs, many businesses are understandably reluctant to invest in new talent strategies. However, tax efficiencies and the use of non-cash benefits could play their part in making new strategies cost-effective.

Benefits of building a multigenerational workforce

As well as widening the talent pool for employers, appealing across generations helps businesses attract the skills needed to succeed in the current environment. Bringing in tech-fluent Gen Z, particularly those adept at using AI, will help boost IT skills. This is much needed, with 21m UK adults of working age lacking at least one of the 20 essential digital skills for work.

Gen Z and Millennials are generations fuelled by the possibilities of technology, who can use tech-savviness and adaptability to solve challenges and help businesses innovate. At the same time, Gen X and Boomers have extensive experience and knowledge, gleaned through periods of rapid development and challenging economic periods.

By combining experience with new skills, multigenerational teams offer a winning formula. They also bring broader perspectives, reflecting the marketplace and giving businesses a glimpse into their customer base’s changing preferences. It’s crucial for businesses to capitalise on this mix of knowledge and skills to share and save it before older generations retire.

Why employee retention matters?

With skills gaps set to widen in the short term, a lot of attention is given to attracting new talent. But businesses shouldn’t ignore retention strategies.

Retaining employees is more cost-effective than replacing them, with typical costs ranging from £11,000 to £75,000 to replace a member of staff in the UK. Bringing in new people always creates risk too, whether that’s making sizeable errors that cause the business to lose money or negatively impacting workplace dynamics. For a quarter of Gen Z though, switching companies is preferable to moving up internally, making it more difficult for businesses to retain people in the multigenerational workforce.

At times like these, when change is difficult to predict, businesses need people who can adapt and flex successfully. They should put emphasis on retaining people with the soft skills to pick up new knowledge and drive evolving strategies, no matter their age. That will involve creating an attractive culture that welcomes and rewards different generations.

Key strategies to focus on

Weeding out obstructive and outdated views will help people with differing approaches work better together. Education is important here to foster mutual understanding between generations. That could take the form of employee spotlights, where people share their career journeys and what they’ve learned, or workshops for employees to solve problems together, which can help to draw out and tackle friction.

Introducing a range of communication and learning tools can also bridge generational gaps. Preferences vary between generations, with Gen X and Boomers commonly opting for face-to-face or phone call conversations and Gen Z and Millennials tending to prefer shorter-form digital messaging. Incorporating multiple options prevents alienating people.

Burnout is felt across many generations in the workplace today. Gen Z is particularly tuned in to stress, with 62% reporting that they would accept lower pay for better work-life balance. Gen Z and Millennials may also experience a higher risk of burnout, with one US study showing 83% of 25–34-year-olds experiencing its impacts compared to 49% of those aged 55 and older. Gen X, caught between caring for parents and supporting children, faces mounting pressure too.

Employers recognise that burnout is a genuine problem that will hinder business performance as well as drive high employee turnover. Offering employee assistance programmes is a relatively straightforward solution and one that is increasingly valued by Gen Z employees. From a workplace culture point of view, involving employees in decision-making can give people a sense of independence and empowerment. At the same time, recognising achievements frequently and in real time can boost morale and help people feel their efforts never go unnoticed.

Giving people more flexibility and choice over how they work can be a more cost-effective way to reward and appeal to employees without additional cash outlays. This flexibility needs to be for everyone, no matter their life stage, to avoid frustrations simmering.

Flexible working rights will be strengthened by the Employment Rights Bill currently moving through Parliament. Businesses need to think about ways to support work-life balance without taking away responsibility and career progression. A popular option is hybrid working, with two to three days a week at home, which is a preference shared by 45% of Gen Z and many Millennials. As part of this offering, businesses will need to pay attention to maintaining the right culture. Technology will help ease communication challenges, but it’s also important to ensure equal access to opportunities and set up connection points for collaborative work and more personal interactions.

Overseas working is another flexibility option with wide appeal, from younger generations keen to experience the world to older generations with new-found freedom now that children have left home. But businesses will need to carefully manage their compliance obligations. That involves managing multijurisdictional payroll, tax and social security requirements and maintaining compliance with local employment and immigration laws. Businesses also need to be aware of potential corporation tax liabilities if a permanent establishment is created.

However, with the necessary steps in place, offering overseas opportunities is possible and effective. Technology can help employers manage what could otherwise be a significant compliance burden. And a robust global mobility policy that sets out what is and isn’t allowed means a business can respond rapidly to different requests. Given that only 25% of employers have a fully developed mobility function, more work is needed to prepare for this kind of flexibility.

Career development and progression is vital to any retention strategy. For the multigenerational workforce, traditional talent development won’t be effective. As already mentioned, Gen Z typically prefers switching companies to moving up internally, so offering more varied career pathways rather than enforcing a linear path of progression could be more attractive.

Reverse mentoring can also be an effective way to develop employees and share knowledge in today’s climate. It can support colleagues to embrace tools like AI and broaden leadership’s understanding of customers/clients, for example, younger people’s priorities and preferred communication methods.

Designing remuneration packages that suit different demographics is key to talent retention strategies. Research suggests that Gen Z has a shorter-term view compared to previous generations, with cost-of-living pressures acutely felt and affecting saving possibilities. This generation may prioritise short-term cash over long-term security such as pension contributions. In a similar vein, Gen X is struggling to save for retirement – for many, only a few years away – with just 28% on track to meet their savings goal. Again, shorter-term incentives to boost the pension pot could be valued.

At the same time, businesses need to align incentives to the long-term goals of the business, which can be a powerful driver of future-focused behaviours. A share-based incentive scheme is a good example. When communicated well, these long-term incentives can appeal to a wide demographic. In the UK and many other countries, they can offer significant tax savings for both employers and employees. They can also provide the fulfilment of working towards a collective goal, which can appeal to younger generations who attach high levels of importance to the purpose of an organisation.

A range of other benefits can both support multigenerational retention while saving costs for businesses. These include:

• Small tax-free benefits – these include those under the trivial benefits exemption and annual functions exemption, and they can appeal to all generations.
• Salary sacrifice schemes – many of these schemes have cross-generational appeal, but particularly for pension contributions and electric cars. They also offer immediate cash savings to businesses that vastly outweigh implementation costs, helping to offset recent hikes in employer NICs.
• Non-cash benefits – this could be extra annual leave or flexible hours, which can in some cases bring virtually no additional costs for employers.

When offering such benefits, businesses need to be careful that measures taken do not infringe National Minimum Wage and National Living Wage rules. HMRC’s enforcement activity is on the rise, and many businesses do not realise they are non-compliant due to the complexity of the rules.

A personalised approach

As talent shortages increase, employers have no choice but to create an attractive employee experience that retains different generations, while appealing to new talent. Doing so presents a huge opportunity. There are creative methods to revise talent strategies in a cost-effective way that comply with tax legislation and make the most of tax-free incentives.

Ultimately, employers need to take the time to listen to their employees and applicants to understand what they want from work. Incentives will only work if they answer people’s wishes and support their short- and long-term goals, which are both generational and personal. And just as market dynamics are changing rapidly, so too are employees’ expectations of their experience at work.

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