"Severe Layoff Wave Hits Financial Sector, Even Employees Born in 1980 Face Early Retirement (Comprehensive)"

Banks, Card Companies, and Insurers
Voluntary and Honorary Retirement Applications Begin at Year-End
Eligibility Expanded to Include Those Born in the 1980s
Record-High Workforce Reduction Expected
New Hires at 5 Major Banks
Over 30% Decrease Compared to Last Year
Performance Bonuses Likely to Decline Further Than Last Year

[Asia Economy Reporter Kangwook Cho] A wave of layoffs is sweeping through the financial sector. The scope of voluntary retirement, including honorary retirement, is expanding to include practical-level employees born in the 1980s, raising expectations that the scale of workforce reduction in banks will reach an all-time high. In addition, the financial sector is accelerating efforts to downsize by significantly reducing new hires.

Banks, Card Companies, and Insurance Firms... Workforce Reduction Expected to Reach Record High

According to the financial sector on the 17th, starting with commercial banks, card companies and insurance firms plan to accept voluntary retirement applications by the end of this year or at the latest by January next year.

Woori Bank announced yesterday that it will accept honorary retirement applications until the 28th. The target is those aged 54 or older (born in 1966). For those born in 1965 who have entered the wage peak system, a lump sum payment equivalent to 24 months' salary will be provided, and for those born from 1966 onward, a lump sum payment equivalent to 36 months' salary will be given. Additionally, tuition support of up to 28 million KRW per child for up to two children, health check-up vouchers, reemployment support funds, and travel gift certificates worth approximately 3 million KRW will be provided. This year's support funds are at the same level as last year.

Earlier, NH Nonghyup Bank accepted honorary retirement applications until the 30th of last month. Compensation was significantly increased by subdividing age and years of service. In particular, those aged 55 (born in 1965) and 54 (born in 1966) this year will receive retirement pay equivalent to 35 and 37 months' salary, respectively. Also, voluntary retirement applications were accepted from employees up to age 40 (born in 1980), with 20 months' salary paid as honorary retirement pay. Additional job transition support funds are also provided. Employees aged 56 receive 40 million KRW in job transition support funds and 10 million KRW in agricultural product gift certificates, while employees aged 48 to 55 receive 10 million KRW in agricultural product gift certificates. As a result, 503 employees applied for honorary retirement at Nonghyup Bank this year, an increase of 147 from 356 last year.

SC First Bank also accepted special retirement applications for employees aged 55 and older until the 2nd. Similarly, compensation was increased. Up to 38 months' salary and tuition support of 10 million KRW per child for up to two children are provided.

Major commercial banks such as KB Kookmin, Shinhan, and Hana Bank are also expected to conduct special retirement soon. After the executive personnel changes for deputy general manager level and above, whose terms end this month, voluntary retirement applications are expected to be accepted. The number of employees at the five major commercial banks decreased by 952 from 77,968 at the end of December 2018 to 77,016 at the end of June 2020. In particular, 629 employees were reduced in the first half of this year alone. There is speculation that the total scale of voluntary retirement this year will increase compared to previous years, reaching an all-time high.

Regional banks are also conducting or showing signs of promoting honorary retirement. DDGB Daegu Bank completed 41 honorary retirement applications this year. In July, 31 employees applied for honorary retirement, and an additional 10 applied in December. Previously, Busan Bank conducted honorary retirement for about 40 employees born in 1964 in April, and Gyeongnam Bank accepted honorary retirement applications for 9 employees born in 1965 in October.

The insurance and card industries are no exception. The insurance industry already conducted voluntary retirement in the first half of the year with companies such as Hyundai Marine & Fire Insurance and Hanwha General Insurance. The card industry has no specific voluntary retirement plans but acknowledges that workforce reduction is inevitable.

Accordingly, there is a forecast that the total scale of voluntary retirement in the financial sector this year will increase compared to previous years, reaching an all-time high. Workforce restructuring to improve management efficiency is unavoidable. The acceleration of non-face-to-face trends such as digital banking and the reduction of offline branches have also contributed. Especially, since solid profits were secured this year, it is analyzed that companies are taking this opportunity to let go of more employees under favorable conditions.

New Hires at Five Major Banks Decrease by 30%... Performance Bonuses Also Expected to Decline

New hiring has also been drastically reduced. The number of new employee recruits at the five major domestic banks decreased by more than 30%, from about 2,300 last year to about 1,600 this year. Due to profitability deterioration caused by the COVID-19 pandemic, branch closures, and expansion of non-face-to-face channels, banks have reduced general employee recruitment to as low as one-fifth of previous levels, making a hiring drought a reality.

Performance bonuses are also expected to decrease. Major banks paid up to 200% of 2019 performance bonuses at the beginning of this year, a significant reduction from the maximum 300% paid for 2018 performance bonuses. Especially this year, with the worsening situation due to COVID-19, the prevailing view is that bonuses will be agreed upon at most at last year's level.

A financial sector official said, "Due to the prolonged COVID-19 situation, increased non-face-to-face work, and the entry of big tech companies into the financial market, tight management has become inevitable," adding, "Large-scale changes such as voluntary retirement, restructuring, and organizational reorganization will proceed to improve management efficiency."

This content was produced with the assistance of AI translation services.