The Business Council of Australia (BCA) warning came amid fears that rapidly ageing populations in Australia and other developed countries will mean shrinking workforces as well as a bigger tax burden for coming generations.
The BCA released guidelines to the country's top 100 companies, which collectively employ 10 percent of the working population, suggesting how they might tackle cultural and attitudinal barriers to the employment of older workers.
Most Australian state governments have outlawed age discrimination in employment, such as mandatory retiring ages, but authorities are aware negative stereotypes still force many older workers into premature retirement.
"These negative stereotypes are not founded on fact," the BCA said. "Research tends to show that the performance of employees declines little with age. One of the great advantages of retaining older workers and encouraging new ones to apply is the diversity they bring to a company's workforce."
Although the consequences of an ageing workforce will not be fully felt for several years, the BCA said developing effective strategies would take time.
"One of the great advantages of retaining older workers and encouraging new ones to apply is the diversity they bring to a company's workforce."
Australia was losing valuable contributors to the economy and individuals were suffering in terms of their ability to provide for their financial security and their broader well-being.
A few companies including Australia Post, the McDonalds fast food chain and Westpac bank had already started addressing the problem, but others have to follow, the BCA said.
"We must challenge the entrenched life-cycle mindset that sees a one-way path from full-time education to full-time work to full-time retirement."
BCA chief executive Katie Lahey says Australia's ageing population will result in a shrinking workforce, which could lead to tax hikes and a decline in government services.
"The figures are quite stark at the moment," she told ABC radio. "There are six taxpayers in the workforce supporting every retiree. In about 20 years' time there'll be three taxpayers supporting every retiree. So it really is a wake-up call to say we've got to start to change our attitude on the value of older workers."