Voices for Improvement of 'Yumyeongmusil' Voluntary Retirement System
National Policy Banks Demand Voluntary Retirement Pay Increase Comparable to Commercial Banks
Government Reluctant Citing Fairness Among Other Public Institutions
[Asia Economy Reporter Kim Min-young] On the 19th, labor and management representatives and government officials gathered in one place to discuss the issue of early retirement at policy banks. Attention is focused on whether labor, management, and the government will come up with a solution regarding the early retirement system at policy banks, which has become virtually ineffective.
According to the government and financial sector, a closed-door meeting on early retirement at policy banks was held in the afternoon under the chairmanship of Moon Sung-hyun, Chairman of the Economic, Social and Labor Council. Representatives from three policy banks?IBK Industrial Bank of Korea, KDB Korea Development Bank, and Export-Import Bank of Korea?along with labor union chairpersons, and officials from the Ministry of Economy and Finance and the Financial Services Commission attended. This was the second meeting since November last year.
Moon Sung-hyun, Chairman of the Economic, Social and Labor Council, is speaking at the 2020 Labor-Management-Government New Year's Meeting held at Post Tower in Jung-gu, Seoul on the 8th. Photo by Moon Ho-nam munonam@
While the first meeting served as an opportunity to initiate discussions on improving the early retirement system, this meeting involved the policy banks’ labor and management and the government stating their positions and listening to opinions.
The labor and management of the policy banks unanimously argued that employees wishing to take early retirement should be allowed to leave the company with a certain amount of severance pay “like commercial banks.” They claimed that a path should be opened for high-salary employees, who are effectively excluded from active duties, to choose early retirement.
Currently, the method for calculating early retirement pay at public institutions follows civil servant regulations. This is because the Ministry of Economy and Finance mandated in 2014 that early retirement pay for public institution employees should, in principle, follow the “civil servant early retirement pay calculation method.” This applies to public institution employees with more than 20 years of service and at least one year remaining until retirement. For example, if an employee has five years left until retirement, the early retirement pay is calculated by taking 45% of the monthly salary previously received as the base salary and multiplying it by half of the remaining months.
Compared to commercial banks, which pay an average wage over the last 20 to 36 months plus additional payments such as children’s tuition, medical expenses, and reemployment or career transition support, this is a lower level. Commercial banks, which provide early retirement pay reaching hundreds of millions of won, allow not only wage peak employees aged 55 and older but also employees with more than 15 years of service to apply for voluntary retirement through special pre-retirement programs.
Given this situation, early retirement is rarely implemented at policy banks. From the employees’ perspective, it is more advantageous to choose the wage peak system, which guarantees retirement age even if wages are reduced, rather than early retirement.
Yoon Jong-won, the new president of IBK Industrial Bank, is delivering his inaugural speech at the inauguration ceremony held on the 29th at the IBK headquarters in Euljiro, Jung-gu, Seoul. Photo by Kim Hyun-min kimhyun81@
In the case of IBK Industrial Bank of Korea, which has about 13,500 employees in total, the number of wage peak system participants increased from 510 in December last year to 984 in 2021 and 1,027 in 2023. Since early retirement is not properly progressing, it is calculated that one out of every ten employees becomes effectively “idle personnel” after a few years of leaving active duties.
Yoon Jong-won, President of IBK, who attended the meeting for the first time, has repeatedly emphasized the need to expand early retirement. Before his inauguration, President Yoon signed a labor-management declaration with the union to “resolve the voluntary retirement issue early,” and told reporters, “There is an issue of fairness with other institutions, and since there is a difference with the institutions we compete with, we will work jointly with other policy banks in the same position to improve the problem.”
The Export-Import Bank of Korea is in a similar situation. There is a consensus between labor and management that it is difficult to reduce personnel by 10% by next year according to the innovation plan announced in 2016, given that early retirement has not been activated. An official from the Export-Import Bank said, “The proportion of wage peak personnel is expected to increase from 3.8% in 2018 to 6.7% in 2022, which brings problems such as decreased organizational productivity and reduced capacity for new hiring,” adding, “Fundamental measures are needed to revitalize the organization and expand new employment for young workers.” President Bang Moon-gyu of the Export-Import Bank has also maintained the necessity of introducing a special early retirement system that reflects realistic severance pay levels.
The key is persuading the Ministry of Economy and Finance. The Export-Import Bank is under the Ministry of Economy and Finance, while IBK and KDB are under the Financial Services Commission, but in reality, approval from the Ministry of Economy and Finance is required to improve the early retirement system. The Ministry is reportedly reluctant to reform the policy banks’ early retirement system due to reasons such as funding and fairness with other public institutions. As of the end of last month, there are 340 public institutions. A Ministry of Economy and Finance official said, “We will carefully listen to the opinions of labor and management of the policy banks during the meeting.”
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