Collaborative Contract

Defining Collaborative Contracts

In surveys, policy documents and discussion, the most common choice employers offer under the label “phased retirement” is the termination of an aging worker and their immediate or eventual re-engagement on a contract basis. The colloquial term for this practice is “retire/re-hire” and the timing and terms and conditions are determined unilaterally by the employer.

Collaborative contracting is an alternative in which the decision is made in advance of termination to change, at a set date, from regular employee to contract status. The terms of this arrangement are negotiated by the manager and employee and can cover length of the contract, compensation (including any benefits) and agreed upon responsibilities.

It is impossible to make such arrangements at the end of a phased or partial retirement process or as a stand-alone choice.

Benefits and Challenges

A major driver of the practice of retire/rehire has been the premium placed in today’s organizations on technical knowledge and critical experience that employers do not want to, or cannot afford to lose. Many employers only realize the value of what has been lost after a valued employee has left. This can lead to random and costly outcomes, which planned and collaborative contracting can avoid. 

The highly customized and wide-ranging forms of contracting argue for a broad description of the potential benefits and challenges for both employee and employer.

Benefits

Tenure

Assuming the employee has continuing value to add, good faith negotiations can enable retention of an employee who might otherwise be lost. This can lead to sustained contribution, knowledge transfer, mentoring and orderly succession in staffing.

Predictability

A clear path to retirement with assurance of some form of ongoing access to an employee’s experience and services is preferable to an after-the-fact negotiation that can yield inferior outcomes.

Flexibility

The questionable appeal of typical contracting is that it gives the employer maximum flexibility, a version of the so-called Gig economy. While that limited commitment might be desirable in a ride share driver, mutual flexibility is a more effective option with valued and long-term staff.

Cost

A widely proclaimed argument for the early dismissal of aging employees is that “they cost too much.” Whether true or not, the potential reduced schedules embodied in contracting can lead to reduced total employment costs for the employer. Depending on the comp and benefits status of the employee, the extended work on these terms can be positive as well.

Challenges

Fairness

Crafting a contract that is mutually satisfactory in advance of undertaking the work can be difficult. The key to success is good faith negotiations at the outset and ongoing troubleshooting once the contract is in place.

Accountability

When an employee has transitioned out of regular employment status, it can be tempting to discontinue regular habits of engagement such as ongoing supervision and staff meetings, regular performance feedback and continuous development. Failure to define and follow through on these commitments can undermine the arrangement.

Cohesion

Because contractors occupy a distinct category – and may work in groups that have more traditional outsourced contracting arrangements – it can prove difficult to maintain group and team cohesion. Failure to overcome this problem can undercut overall effectiveness and threaten the viability of the contract.

Making Your Proposal

Having reviewed the Qualifying section and with this information as background, you can decide to proceed – or put this idea on hold for a later day. If you choose to go forward, follow the steps outlined in Proposing, Planning and Persuading. The process we outline is a rigorous one. It is designed to position you and your proposal for success. Since you may well be a pioneer in your organization as you go forward, it is important to understand that while the outcome of such ventures is never assured, there will definitely be hard work along the way.

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