Australia is discussing skills shortages, workforce participation and the loss of experienced employees. Japan has been dealing with these issues for decades.

Japan has one of the world’s oldest populations. Its workforce is shrinking, fewer young people are entering employment, and employers cannot assume that every worker who retires will be easily replaced. Its response has been to progressively extend working lives and place greater responsibility on employers to provide meaningful pathways for older employees.  Japan has not simply declared that everyone must work until 70. Instead, it has aligned employment law, pension settings, employer support and workplace practices to make continued employment more achievable.

For Australian HR leaders, the most important lesson is clear:

Older-worker participation cannot be treated as an individual retirement decision. It must become part of workforce strategy.

Why Japan needs older employees

Japan’s approach is being driven by demographic necessity.  The country’s working-age population peaked in the mid-1990s and has been declining ever since. The OECD expects Japan’s working-age population to fall substantially further by 2060, while the number of older people relative to working-age people continues to rise.

This creates immediate challenges for employers:

  • fewer workers are available to fill vacancies;
  • experienced employees are difficult to replace;
  • technical and organisational knowledge can disappear quickly;
  • businesses face growing competition for younger talent; and
  • a smaller workforce must support an increasingly older population.

Japan has therefore stopped treating older employees simply as people approaching the end of their careers. They are an increasingly important source of workforce capacity.

The results are visible. In 2024, Japan’s employment rate for people aged 55–64 reached 79.2%, compared with an OECD average of 64.6%. Employment among people aged 60–64 is now above 70%, placing Japan among the highest-performing OECD countries for older-worker participation.

How Japan has extended working lives

Japan has traditionally allowed organisations to set mandatory retirement ages, commonly at 60. Rather than abolishing retirement ages across the board, the government has progressively required employers to provide continued-employment options.  Under Japan’s employment framework for older people, employers must generally secure employment opportunities until age 65 for employees who want to continue working. Organisations can do this by:

  1. raising the mandatory retirement age;
  2. abolishing mandatory retirement; or
  3. introducing a continued-employment or re-employment system.

Many employers use the third option. An employee may formally retire at 60 and then return under a new employment arrangement.

Since April 2021, employers have also been expected to make reasonable efforts to provide work opportunities until age 70. This is not a universal legal retirement age of 70. It is an obligation to actively consider ways of extending participation. Options can include continued employment, work through another organisation, contracting arrangements or certain employer-supported community activities.

The distinction is important. Japan has not simply shifted a retirement date. It has broadened the range of ways in which people can continue contributing.

The business case for retaining older employees

Japan’s model recognises that experienced workers hold forms of value that are not always visible in a position description.  Long-serving employees often understand:

  • why particular processes were designed;
  • how to recognise risk before it becomes a problem;
  • who holds critical knowledge across the organisation;
  • how customers and stakeholders prefer to work;
  • which past decisions succeeded or failed; and
  • how to navigate complex situations that cannot be resolved by following a procedure.

These capabilities are difficult to replace through recruitment alone.  Older employees can add significant value through technical advisory work, quality assurance, coaching, safety, stakeholder management, project governance and the transfer of organisational knowledge.  Keeping experienced people in the workforce can also reduce recruitment costs, shorten the time required to develop successors and provide continuity during periods of change.  For employees, continued work can provide income, retirement savings, purpose, social connection and a more gradual transition into retirement. Australia’s Intergenerational Report similarly recognises that continued workforce participation can support both economic security and personal wellbeing.

What Japan has not solved

Japan’s model is not without problems.

Re-employment after a formal retirement age can involve lower pay, reduced status, fixed-term contracts and fewer development opportunities. An employee may continue doing similar work but under significantly less favourable conditions.  That is not necessarily an example Australia should follow.

There is also a risk that continued employment becomes passive retention: the employee remains on the payroll but is given little responsibility, development or meaningful work.  Keeping someone employed is not the same as keeping them engaged.

A successful older-worker strategy must therefore be based on contribution, capability and job design—not simply age or tenure. Employees should not be retained out of sentiment, nor should they be pushed aside because they have crossed an arbitrary age threshold.

Why Australia should pay attention

Australia is not yet experiencing demographic ageing on Japan’s scale, but it is moving in the same direction.

The Australian Treasury projects that the national labour-force participation rate will decline from 66.6% in 2022–23 to 63.8% by 2062–63, largely because older people will make up a greater share of the population.

Australia already has a significant mature-age workforce, but barriers remain.

In June 2024, labour-force participation was 69.6% among Australians aged 55–64 and only 16.3% among those aged 65 and over. Mature-age unemployment was relatively low, but older jobseekers who lost work remained unemployed for an average of 86 weeks—more than twice the duration recorded for workers aged 15–54.

Jobs and Skills Australia also found that employers valued mature applicants for their experience, attitude, work ethic, qualifications and skills. Yet only around one-third of surveyed employers had received a mature-age application during the previous year.

This suggests that Australia’s problem is not simply whether older employees are willing or able to work. It also concerns whether organisations are recruiting, developing and designing work in ways that allow them to participate.

What Australian HR can learn

  1. Treat age as a workforce-planning issue

HR should understand where retirement risk sits within the organisation.

This means examining workforce age profiles, critical positions, specialist capability, succession readiness and the time required to replace experienced employees.

A retirement-risk assessment should identify:

  • roles with significant knowledge concentration;
  • employees who hold critical relationships;
  • positions with long development lead times;
  • areas where recruitment is already difficult; and
  • teams likely to experience several retirements within a short period.

This is not about predicting when individuals will retire. It is about understanding organisational exposure and creating options before capability is lost.

  1. Begin late-career conversations earlier

Many employers do not discuss retirement until an employee announces a departure.  By then, the organisation may have only a few months to recruit a replacement and transfer decades of experience.  Late-career conversations should begin well before retirement is imminent. They can explore:

  • whether the employee wants to continue working;
  • possible changes to hours or responsibilities;
  • future development needs;
  • mentoring or advisory opportunities;
  • succession and knowledge transfer; and
  • a gradual transition rather than an abrupt exit.

These conversations must be voluntary and carefully managed. They should expand an employee’s choices, not create pressure to retire.

  1. Create more than two choices

The traditional model presents employees with two options: remain in the same full-time job or retire completely.

Japan’s experience demonstrates the value of broader pathways.

Australian employers could offer:

  • reduced working weeks;
  • phased retirement;
  • job sharing;
  • seasonal or annualised work;
  • technical-specialist positions;
  • project assignments;
  • internal consulting roles;
  • coaching and mentoring;
  • short-term transition roles; and
  • contractor or portfolio arrangements.

These options should be part of formal workforce policy rather than informal exceptions negotiated for a small number of senior people.

  1. Redesign roles around contribution

Not every employee will want—or be able—to perform the same role indefinitely.  In physically demanding work, employers may need to adjust duties, rosters, equipment or work environments. In management roles, some employees may prefer to move away from people leadership while retaining technical or commercial responsibility.

The answer should not be to give older employees token duties. It should be to redesign work around the capability they can continue to contribute.  An experienced employee may create more value reviewing risk, coaching others and solving complex problems than by continuing every operational component of their previous role.

  1. Make knowledge transfer measurable

“Mentor the younger team” is too vague to be an effective succession strategy.  Knowledge transfer should identify:

  • what knowledge must be retained;
  • who needs to learn it;
  • how it will be documented;
  • which tasks must be demonstrated or practised;
  • what time will be allocated; and
  • how the organisation will know the successor is ready.

Mentoring and knowledge transfer should be recognised as productive work, included in performance expectations and given sufficient time.

  1. Continue investing in development

One of the most damaging assumptions in workforce planning is that training older employees delivers a poor return because they may retire soon.  A 55- or 60-year-old employee may remain in the workforce for another decade or longer. Excluding them from technology, AI or leadership development can create the very capability gap later used to justify their replacement.

Australian research released in 2026 found limited evidence that learning participation among older workers is increasing in line with the growing importance of lifelong learning.   Development decisions should be based on future contribution and role requirements—not age.

  1. Maintain fairness and accountability

Age inclusion does not mean retaining everyone indefinitely or lowering performance expectations.  Older employees should continue to have clear objectives, meaningful responsibilities and appropriate performance management.

Pay should reflect the work, capability and responsibility required. Where hours or duties genuinely change, remuneration may also change, but it should not be automatically reduced simply because an employee has reached a particular age.

Moving from retirement management to career transition

The most useful lesson from Japan is not that Australians should be required to work until 70.  It is that longer lives require more flexible careers.  Some people will want to retire early. Others will want to continue working. Many will prefer a gradual transition involving reduced hours, different responsibilities or portfolio work.

HR’s role is not to prescribe one outcome. It is to create credible choices while protecting organisational capability.  Australian organisations that retain, retrain and redesign work for experienced employees will be better placed to manage skills shortages, succession risk and demographic change.

The question is no longer simply:

“When will this employee retire?”

The better question is:

“How might this person continue contributing—and what would need to change to make that possible?”