7 out of 10 Companies "Feel Burdened by Retirement Age Extension... Prefer Reemployment After Retirement"

Hankyung Association, Survey on Corporate Awareness of Elderly Employment Policies

Seven out of ten companies feel burdened by the seniority-based pay system, which increases salaries according to years of service, when the retirement age is extended.

The Korea Economic Association announced the results of a survey on corporate perceptions regarding elderly employment policies on the 4th. The survey was conducted by Research & Research, a public opinion research agency, targeting 121 HR and labor managers from domestic companies with more than 300 employees. Among the respondents, 67.8% said that extending the retirement age is burdensome, citing reasons such as increased labor costs due to seniority-based pay (26.0%), personnel stagnation within the organization (23.2%), negative impact on youth hiring (19.3%), and decreased productivity of older workers (16.6%).

60.3% of companies have adopted a seniority-based pay system. The Korea Economic Association stated, "If the retirement age is extended further, there are concerns about significant increases in labor costs and other side effects." They added, "When the retirement age of 60 was introduced in 2013, the wage peak system was proposed as an alternative to reduce corporate cost burdens, but as of this year, less than half (48.2%) of companies with more than 300 employees have implemented the wage peak system."

Proportion of Wage System Adoption (left), Proportion of Wage Peak System Adoption. Provided by Hankyung Association

The Presidential Economic and Social Labor Council (ESLC), composed of government and labor-management representatives, is currently reviewing the 'continued employment system' as a measure to promote elderly employment. The continued employment system allows workers to keep working even after reaching retirement age. The ESLC plans to reach a social consensus by the first quarter of next year.

The survey results showed that 71.9% of companies preferred rehiring retirees. In contrast, only 24.8% preferred extending the retirement age itself, and 3.3% favored abolishing the retirement age altogether. Companies cited reasons for preferring rehiring retirees such as securing employment flexibility (35.2%), rehiring only those with expertise or who wish to continue working (25.8%), and the ability to adjust wage levels (24.5%).

In fact, 60.4% of companies have experience in continuously employing older workers, and they chose rehiring to utilize the expertise of skilled personnel (44.1%). They also reported using rehiring in cases of labor shortages in certain job categories (26.6%) and difficulties in new hiring (12.8%).

Difficulties in Personnel and Labor Management Due to Continued Employment of Elderly Workers (Left), Policy Improvement Tasks for Creating an Environment for Continued Employment of Elderly Workers. Provided by Hankyungyeop

The Korea Economic Association evaluated that "the rehiring method after retirement allows adjustment of working hours and wages according to the productivity of older workers, enabling efficient workforce management." However, companies expressed various concerns about employing older workers, pointing out health issues and industrial accident risks (28.9%), decreased productivity (28.9%), and high labor cost burdens (24.8%).

Regarding the tasks that the government and National Assembly should prioritize to create an environment for elderly employment, the survey identified expanding labor cost support (28.1%), providing tax benefits (24.0%), improving procedures for wage system reform (22.3%), and easing regulations on dispatch and fixed-term employment (21.5%).

Lee Sang-ho, head of the Korea Economic Association, said, "A rigid labor market and a wage system that does not reflect productivity place a heavy burden on companies utilizing elderly workers." He added, "Rather than uniformly extending the retirement age, it is necessary to expand employment benefits for older workers and reform the wage system to reflect job value and productivity."