Government Tough on 'Retirement Age Extension', Introduces New Elderly Employment Support Program Offering '2.4 Million Won Per Person'

Encouraging Employment of Seniors Aged 60 and Over

New Cash Support Program Established
Government: "Incentives Needed for Companies Without Retirement Age System to Hire Seniors"

[Sejong=Asia Economy Reporter Moon Chaeseok] In a situation where it is not easy to accept the labor sector's demand to raise the statutory retirement age to 65, the government has taken out an additional card related to encouraging the employment of elderly workers. It has decided to provide up to 2.4 million KRW in labor costs per worker to small and medium-sized enterprises that increase the number of workers aged 60 or older. Some question whether there is a need to create another incentive system for hiring elderly workers when similar systems already exist.

The government announced on the 30th of last month, through the Emergency Economic Central Countermeasures Headquarters meeting, that it will implement this elderly employment incentive (employment subsidy) policy. The core of the employment subsidy system is that from January 1 next year, if the number of workers aged 60 or older employed by a business owner exceeds the average of the previous three years, labor costs will be supported. For example, if Company A, which employed 100 workers aged 60 or older over the past three years, is confirmed to have 105 such workers next year, the system will pay 2.4 million KRW per person, totaling 12 million KRW for 5 workers, to the employer of Company A. However, according to the Enforcement Decree of the Employment Insurance Act, if a person is eligible for both the employment subsidy and the continuous employment subsidy, only one will be paid.

The issue is that there is already a 'Continuous Employment Incentive for Elderly Workers' (continuous subsidy) system, yet the government has announced plans to create a similar system again. The continuous subsidy system cannot support workplaces that do not adopt a retirement age system or companies that newly hire elderly workers aged 60 or older. According to the government, 79% of workplaces do not operate a retirement age system.

According to the Ministry of Employment and Labor, the main ways to encourage companies to continue utilizing workers beyond retirement age are 'introducing a retirement age extension system,' 'abolishing the retirement age system,' and 're-employment.' The most certain system is to raise the statutory retirement age and impose employment obligations on companies, but there is considerable opposition from the business community. If the 'retirement age extension' system is legally introduced uniformly without considering industry or workplace size, the labor cost burden on small businesses will increase, and conflicts with job-seeking youth may intensify in large corporations, financial sectors, and information technology (IT) industries preferred by young people. Most companies adopt a seniority-based wage system favorable to long-term employees, so allowing long-term employees to work until 65 instead of 60 effectively extends their tenure.

Since the uniform introduction of the retirement age extension system is difficult and the aging population is increasing, the government explains that it created the employment subsidy to encourage companies to continue hiring workers aged 60 or older despite the existence of the continuous subsidy system. Regarding this, Hong Nam-ki, Deputy Prime Minister and Minister of Strategy and Finance, who chaired the meeting, said, "As the large-scale retirement of the elderly baby boomer generation has become a reality since last year, we will actively respond by promoting policies to revitalize elderly employment and improve productivity."

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