Retirement Age · Continued Employment
Retirement Age & Continued Employment
What is the retirement age?
- Minimum legal retirement age: 60
- The issue is shifting to designing continued employment after retirement
- Setting and publishing rehiring criteria reduces disputes
A retirement age ends the employment relationship on a set date, regardless of the employee’s wishes or the company’s evaluation. That is why mandatory retirement requires no dismissal notice, no written notice, and gives no grounds for an unfair dismissal claim. This effect holds only while the retirement clause remains in force in the rules of employment. In practice, disputes come not from age but from how the retirement date is defined. Depending on whether it is the 60th birthday itself, the last day of the birthday month, or December 31 of that year, the retirement date can differ by more than ten months, and where the rules are silent, courts are more likely to read them in the employee’s favor.
Continued employment falls into three broad types: retirement age extension, abolition of the retirement age, and rehiring after retirement. The most common approach among Korean companies is rehiring on fixed-term contracts. Rehiring ends the existing employment relationship and starts a new contract, so you settle severance pay and annual leave and redesign pay, working hours, and duties. The law leaves some room here. Workers aged 55 or older are exempt from the 2-year limit on fixed-term employment, so contracting beyond 2 years creates no obligation to convert them to permanent status. Employment insurance unemployment benefits do not apply to people newly hired after age 65. Also worth weighing at the design stage: support programs such as the continued employment subsidy for older workers.
When you pair continued employment with a wage peak system, distinguish between two types. The retirement-extension type adjusts pay while raising the retirement age. The retirement-maintenance type cuts pay and leaves the retirement age as it is. Courts assess the two differently. For the retirement-maintenance type, the Supreme Court has looked at whether the purpose is valid, how deep the cut is, and whether there are measures that reduce workload and intensity in proportion to the cut. Without a reasonable basis, it has held the system void as age discrimination. A design that cuts pay but keeps the work the same is the riskiest.
The most common misconception is that rehiring is entirely at the company’s discretion. If the rules of employment or a collective agreement contain a rehiring clause, or if the company has routinely moved nearly everyone reaching retirement age onto fixed-term contracts for several years, employees may gain a legitimate expectation of being rehired. Excluding only certain individuals then looks a lot like a dismissal dispute. The second issue is paperwork. If you skip the four major social insurances loss and acquisition filings and the severance settlement when rehiring, tenure is treated as unbroken, and you may have to pay severance and annual leave allowance retroactively several years later. Keeping an employee at work past the retirement date without notice can also be treated as a continuing employment relationship, so track the list of employees approaching retirement age starting at least 3 months ahead.
Jongmu KimSpecialist in corporate talent development and job competency building
Hwi KimCEO of HRDIST & talent development system consultantKorea’s Act on the Prohibition of Age Discrimination in Employment and Elderly Employment Promotion requires employers to set a retirement age of at least 60, and treats any lower age as 60.
Company A, an auto parts manufacturer in Gyeonggi Province, has 320 employees and KRW 90 billion (≈ US$67,335,000) in annual revenue. Within 3 years, 47 employees will reach the retirement age of 60, and 29 of them are production engineers. So HR first had to settle the criteria for who stays before deciding who stays. (Hypothetical example)
- When the HR manager opened the rules of employment, they found just one line: 'The retirement age is 60.' So they set the retirement date as the last day of the month in which the employee turns 60 and revised the rules with majority consent.
- The head of production said, 'If the 11 people who know the equipment history leave all at once, we can’t run two of our lines,' and brought data to the meeting showing that training replacements takes 18 months.
- The labor relations manager drafted a contract re-employment plan: one-year contracts, 32 hours a week, about 70% of the prior year’s salary, with duties reshaped around inspection and mentoring junior staff.
- They set three re-employment criteria: job necessity, disciplinary record over the past two years, and health checkup results. These were announced internally six months before retirement age, and anyone not selected would be told the reason in writing.
- They re-employed 13 of the 16 eligible employees in the first year and avoided the line stoppage they had feared. That saved about KRW 120 million (≈ US$89,800) in hiring and training costs, and they also applied for the continued-employment subsidy for three of the re-hired workers.