Private Banks' 'Hopeful Retirement Storm' vs. Policy Banks' 'High-Paid Worker Bottleneck'

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

[Asia Economy Reporters Sunmi Park, Wondara] KB Kookmin Bank will conclude the workforce restructuring of the five major commercial banks?Kookmin, Shinhan, Hana, Woori, and NongHyup?by accepting voluntary retirement applications until the 22nd of this month. 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 no applicants this year due to low compensation.

According to the financial sector on the 21st, Kookmin Bank is accepting voluntary retirement applications from those born between 1965 and 1973 until the 22nd of this month. 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 in 1973. The voluntary retirement package this year includes special retirement pay equivalent to 23 to 35 months’ salary and either tuition support (3.5 million KRW per semester, up to 8 semesters) or reemployment support funds (up to 34 million KRW). The total number of voluntary retirements across the five major banks at the end of the year and early next year is expected to exceed 2,000.

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

Policy Banks Have Zero Voluntary Retirement Applications... 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 in line with the serious manpower shortage caused by the sharp increase in employees subject to the wage peak system. For example, the number of employees subject to the wage peak system at IBK (Industrial Bank of Korea) 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 working longer.”

The lack of voluntary retirement applicants at policy banks is due to low compensation. 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 retirement 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, policy banks’ voluntary retirement pay is only about 20-30% of that of commercial banks, so most employees choose the wage peak system to receive more money than retirement pay. Internally, policy banks share the opinion that introducing a voluntary retirement system is urgent to resolve personnel stagnation, but the government is reluctant due to concerns about fairness with other public institutions.

There are also many criticisms 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, advised, “The jar-shaped workforce structure causes a decline in bank vitality and increased costs. To improve workforce efficiency, it is necessary to devise a plan to transform the jar-shaped workforce structure into a columnar or pyramid-shaped structure.”

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