Telecom giant starts buying out 35-year-olds; seeks younger recruits

Is 35 now over the hill?
Buyouts offered to those under 50
Ericsson seeks younger recruits
Apr. 26, 2006. 06:28 AM
MADHAVI ACHARYA-TOM YEW
BUSINESS REPORTER


Is 35 now over the hill?

Telecom giant LM Ericsson AB is offering buyouts to up to 1,000 of its employees in Sweden, a voluntary package that is only being offered to employees between the ages of 35 and 50.

The novel initiative is meant to clear the way for younger workers. Ericsson also announced plans to hire 900 new employees—only those under 30 need apply—over the next three years.

Ericsson, the world's biggest supplier of mobile phone equipment and networks, currently employs 21,300 people in Sweden and about 50,500 in 140 countries around the world.

"The purpose of this program is to correct an age structure that is unbalanced," Marita Hellberg, Ericsson's global head of human resources, told the Financial Times of London this week. "We would like to make sure we employ more young people in order not to miss a generation in 10 years' time."

It's a unique move, said professor Ronald Burke, who teaches organizational behaviour at the Schulich School of Business at York University in Toronto. "Clearly, it's rare to have a company even think along those lines."

Companies typically reserve buyout offers for those aged 45 or 50 and up—the thin-haired rank-and-file who have racked up a decade or two of minimum service.

That's because it's cheaper for the employer to fund a buyout worth a couple of years' salary than to keep someone on the payroll, at the top of the salary range, for several more years. Younger, less experienced staff, can often be hired for less pay.

And the value of long-service employees' company paid pensions can also increase steeply as they spend more years on the job.

For Ericsson, keeping its workforce young may be crucial to the company's ability to stay competitive in an industry built on offering consumers the latest gadgets and technology. For young people, especially, a cellphone isn't just a way to make a call—it's an Internet connection, a stereo, a camera, and a pocket-sized television or camcorder.

"That's where they're hoping to attract the younger element in the market, with all of the stuff you do in addition to basic telephone calls," said Dan Ondrack, a professor of organizational behaviour at University of Toronto's Rotman School of Management.

Organizations that don't hire for a long time get into ruts, Burke said. "You get a lot of people who've been there together for such a long period."For Ericsson in Sweden, the average age of its workers is 41. Globally, the average age of its workforce is slightly less, at 39. At rival Nokia Oyj, the Finland-based mobile phone maker, the average age is 35.

It's difficult to say if Canadian companies may also start to offer voluntary buyouts to younger workers, Burke said. But certainly, restricting new hirings to those under 30 would be deemed discriminatory. "I'm not sure how (Ericsson) will defend that particular initiative," he said.

So, does this really mean that 35 is over the hill? "That's the subtext, I would say," Burke said.

"I'd be worried if I was over 35, in terms of the subtle message that is being conveyed."