86% of SMEs Prefer "Selective Reemployment" for Extending Employment of Older Workers

Korea Federation of SMEs Announces Results of Survey on Employment Extension Among Small and Medium-Sized Enterprises

Nearly 90% of small and medium-sized enterprises (SMEs) believe that selective reemployment is the most desirable method for extending the employment of retirees who have reached the mandatory retirement age, according to a recent survey.

On November 19, the Korea Federation of SMEs announced the results of its "Survey on SMEs' Opinions Regarding Employment Extension." The survey was conducted among 304 SMEs with 30 or more employees that operate under a mandatory retirement system.

The results showed that 86.2% of responding companies preferred selective reemployment, while 13.8% supported a statutory extension of the retirement age. Selective reemployment refers to a system in which the decision to extend employment is based on factors such as job performance and health status, and new employment contracts are signed that allow for adjustments to the employment period and wages.

When asked about the biggest burdens associated with extending the statutory retirement age, 41.4% cited increased labor costs. This was followed by industrial safety and health issues (26.6%), reduced opportunities for hiring young people and new employees (15.8%), and decreased productivity and work efficiency (12.2%).

While labor costs were the biggest concern across all industries, the second most significant burden varied by sector. In manufacturing and general service industries, industrial safety and health issues were cited as the next biggest concern (34.4% and 27.1%, respectively). In knowledge-based service industries, reduced opportunities for hiring young people and new employees ranked second (22.9%).

More than two out of three responding companies (67.8%) reported that they already have systems in place to extend the employment period of retirees, such as rehiring them as contract workers. Meanwhile, 18.4% do not operate such reemployment systems, and 13.8% indicated that the question was not applicable, either because they do not have retirees or for other reasons.

Among SMEs that implement reemployment systems, 79.1% decide whether to extend employment based on job performance and health status, while 20.9% extend employment to all applicants who wish to continue working.

Regarding the wages of employees whose employment has been extended, 75.7% of companies pay at a level similar to that at the time of retirement, 23.3% pay a reduced amount, and 1.0% pay an increased amount.

When asked about the types of positions for which employment extension is most needed, 92.7% of manufacturing companies cited production workers, while very few cited other positions such as general office staff (6.0%). In knowledge-based service industries, 47.6% cited research and development positions and 32.4% cited general office staff. In general service industries, 45.8% cited general office staff and 25.0% cited research and development positions.

As for policies to promote the employment of older workers, the most frequently cited needs were employment subsidies (88.5%) and tax support (85.2%). These were followed by support for social insurance premiums (73.7%), occupational safety and health support (66.8%), vocational training support (46.7%), and job placement services (28.0%).

Lee Myungro, Director of Human Resources Policy at the Korea Federation of SMEs, stated, "It has been confirmed that most SMEs with a mandatory retirement system view selective reemployment as a realistic approach to extending the employment of older workers. To alleviate labor shortages in SMEs and address concerns about reduced youth employment, it is necessary to adopt measures that enhance wage and employment flexibility, such as selective reemployment." He added, "Since increased labor costs are the biggest burden for SMEs when extending the employment of older workers, substantial financial support, such as employment subsidies and tax support, is needed to reduce the cost burden on SMEs."