"Voluntary Retirement Is Someone Else's Story"... Bottleneck of High-Paid Workers at National Policy Banks (Comprehensive)

More than 2,000 Voluntary Retirements Expected at 5 Major Commercial Banks Year-End and New Year
Policy Banks Start Wage Peak System Without Early Retirement, Raising Age Limit
Export-Import Bank Raises Wage Peak Age from 56 to 57

[Asia Economy Reporters Sunmi Park and Wandara] KB Kookmin Bank will conclude its voluntary retirement applications by the 22nd of this month, marking the end of workforce restructuring among the five major commercial banks?Kookmin, Shinhan, Hana, Woori, and NongHyup. While private banks are regularizing voluntary retirement by offering exceptional conditions to improve operational efficiency, policy banks continue to endure the side effects of personnel stagnation by maintaining a nominal voluntary retirement (honorary retirement) system with low compensation, resulting in no applicants again this year.

According to the financial sector on the 21st, Kookmin Bank is accepting voluntary retirement applications until the 22nd of this month, targeting those born between 1965 and 1973. Last year, Kookmin Bank’s voluntary retirement targeted those born between 1964 and 1967, but this year the eligibility has expanded to include not only those subject to the wage peak system but also those born up to 1973. This year’s voluntary retirement offers special severance pay equivalent to 23 to 35 months’ salary, along with tuition support (3.5 million KRW per semester, up to 8 semesters) or reemployment support funds (up to 34 million KRW). Considering that the total number of voluntary retirements at the other four banks amounts to about 1,700 and that Kookmin Bank had 462 applicants last year, it is expected that the total number of voluntary retirements among the five major banks at the end of the year and beginning of the next will exceed 2,000.

In contrast, the atmosphere of voluntary retirement at policy banks is like a different world. Policy banks are responding by postponing the age at which employees enter the wage peak system without any voluntary retirees. The Export-Import Bank recently agreed in labor-management talks to delay the entry age for the wage peak system from 56 to 57 years old. Currently, the Industrial Bank of Korea also has the wage peak entry age set at 57. Only the Korea Development Bank applies the wage peak system starting at age 56. This too was postponed by one year from 55 to 56 through last year’s labor-management agreement.

Policy Banks Have Zero Voluntary Retirement Applicants... Why?
Responding by Postponing Wage Peak Entry Age

The reason policy banks are postponing the wage peak entry age is due to the absence of voluntary retirement applicants. This is linked to the serious manpower shortage caused by a sharp increase in the number of employees subject to the wage peak system.

For example, at IBK (Industrial Bank of Korea), the number of employees subject to the wage peak system was 530 at the end of 2019 but is expected to surge to 1,014 by the end of this year. A representative from the Export-Import Bank explained, “Although the importance of policy finance has increased and workload has grown due to the spread of COVID-19, there are practically no honorary retirees, causing a rapid increase in the number of employees entering the wage peak system.” They added, “Delaying the wage peak entry age is intended to secure more workforce capable of continuing to work.”

The low compensation is the cause of no voluntary retirement applicants at policy banks.

Since 2015, the three major policy banks?Korea Development Bank, Export-Import Bank, and IBK?have had no voluntary retirees. Policy banks apply the civil servant honorary retirement pay calculation method, which calculates severance pay by taking 45% of the existing monthly salary as the base salary and multiplying it by half of the remaining months of service. In reality, the voluntary retirement pay at policy banks is only about 20-30% of that at commercial banks, so most employees choose the wage peak system to receive more money than severance pay. Internally, policy banks share the opinion that the introduction of a voluntary retirement system is urgently needed due to personnel stagnation, but the government is reluctant, citing fairness with other public institutions.

Experts also point out that the jar-shaped workforce structure of policy banks reduces operational efficiency. As the number of employees subject to the wage peak system increases, there will inevitably be many managers but a shortage of frontline workers. Woojin Kim, a research fellow at the Korea Institute of Finance, said, “The jar-shaped workforce structure causes a decline in bank vitality and increased costs,” advising, “It is necessary to devise measures to transform the jar-shaped workforce structure into a columnar or pyramid-shaped structure to improve workforce efficiency.”