[Exclusive] Hotel Lotte, Struggling with COVID-19, Implements Voluntary Retirement

New 'Senior Wage System' Established for Wage Peak Employees
100% Payment of Ordinary Wages, Half-Wage System, and Honorary Retirement System
Honorary Retirement System Temporarily Implemented Only This Year
Labor Cost Savings from Wage System Reform to Be Used for Improving Treatment of Employees with Less Than 5 Years
Aiming to Become a Company Where All Employees Can Grow Together

Lotte Hotel Seoul Exterior View

[Asia Economy Reporter Lim Hye-seon] Hotel Lotte, which has been in a near shutdown state for almost half a year due to the novel coronavirus infection (COVID-19), has begun workforce restructuring.

According to the hotel industry on the 19th, Hotel Lotte is implementing voluntary retirement for employees aged 58 and above (born between 1961 and 1963) who are entering the wage peak system. The wage peak system is a scheme that extends or guarantees the retirement age (60 years old) while reducing wages from a certain age. The company will pay a consolation bonus based on years of service in addition to the statutory retirement allowance to those who take voluntary retirement. A Hotel Lotte official explained, "Since it is in the form of accepting applications, the exact number of people has not been determined yet," adding, "We will know the approximate scale only after the application period ends." This is the first time Hotel Lotte has implemented voluntary retirement since the early 2000s. The voluntary retirement program is tentatively implemented only this year.

Along with this, Hotel Lotte is introducing a senior wage system for employees entering the wage peak system for the first time. Employees can choose one of three options: 100% payment of regular wages, half-wage system (20 hours of work per week, 50% wage payment, completion of educational programs and use of personal time), or voluntary retirement system (limited to this year). This system was established through labor-management agreement to overcome the limitations of the existing uniform wage peak system and to provide senior employees with opportunities to plan a second life after retirement. Hotel Lotte plans to use the labor cost savings from the wage system reform to improve the treatment of employees with less than five years of service. From this year, performance bonuses for employees with less than five years of service will be increased by 100%.

A Hotel Lotte official said, "Due to the worsening management caused by the COVID-19 situation, workforce restructuring is necessary," and added, "The senior wage system is a measure agreed upon in the labor-management agreement and implemented with the consent of all employees. It is a step for the company to leap forward, allowing senior employees who have devoted themselves to the company's development and junior employees who are the hope for the future to grow together."

Hotel Lotte's workforce restructuring clearly reflects the difficulties faced by the hotel industry after COVID-19. Hotel Lotte recorded an operating loss of 79.1 billion KRW on a consolidated basis in the first quarter of this year. The hotel business division alone recorded an operating loss of 63.8 billion KRW, turning to a deficit. This reflects the sharp decline in foreign tourists due to entry restrictions caused by COVID-19. Domestic tourism demand has not recovered, showing no signs of revival, and the situation in the second quarter is expected to worsen further. Earlier, as difficulties from COVID-19 spread to the hotel industry, Hotel Lotte implemented measures such as a 10% salary cut for employees for three months, encouraging voluntary unpaid leave on a weekly basis, paid leave system, and a four-day workweek.