🚨 Continued Employment

Today Korean Social News for Beginners | 2026.01.13

0️⃣ The Dilemma Between Labor Costs and Financial Stability for Senior Workers

📌 Half of Companies Say "Continued Employment Is Difficult Due to Labor Costs"… Rehiring After Retirement More Common Than Extending Retirement Age

💬 A survey shows that half of companies employing workers aged 60 and over are not implementing continued employment systems like extending retirement age or rehiring after retirement, citing labor cost burdens as the main reason. According to the Korea Employment Information Service, 70% of companies support making continued employment into law, but they prefer "duty to make efforts" (which is closer to voluntary) rather than mandatory "legal obligation." Particularly, rehiring after retirement has proven to have lower wages and shorter employment periods compared to extending retirement age, making it less favorable for senior workers. Companies are reluctant to institutionalize the system, citing the need for flexibility in personnel management, making it urgent to find a balance between senior workers' financial stability and companies' cost burdens in an aging society.

💡 Summary

• Continued employment is a system that allows workers to keep working at the same company after the legal retirement age.
• 52% of companies are not implementing continued employment systems due to labor cost burdens.
• Rehiring after retirement has lower wages and job security compared to extending retirement age, requiring improvement.

1️⃣ Definition

Continued employment means a system that allows workers to continue working at the same company for a certain period even after the legal retirement age (60 years old). It operates in various forms such as extending retirement age, rehiring after retirement, or abolishing retirement age, and its introduction is being discussed to address labor shortages due to an aging population and issues with retirement income security.

Korea amended the "Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion" in 2013, making retirement age of 60 or older mandatory. However, as the starting age for receiving National Pension benefits was delayed to 63 or later, an income gap period occurs between retirement and pension receipt. Continued employment is receiving attention as a policy alternative to fill this gap and sustain economic participation of senior workers.

💡 Why Is This Important?

• In an aging society, it can utilize skilled workers and address labor shortage problems.
• It fills the income gap between retirement and pension receipt, preventing old-age poverty.
• Balance is needed between companies' labor cost burdens and flexibility in personnel management.
• Senior workers' treatment can vary greatly depending on system design, requiring careful approach.

2️⃣ Current Status and Problems of Continued Employment

📕 Companies' Continued Employment Status

• More than half of companies are not implementing continued employment. Key findings include:

  • 52% of companies employing workers aged 60 and over are not operating continued employment systems due to labor cost burdens.
  • Among companies implementing continued employment, "rehiring after retirement" is used more than "extending retirement age."
  • Small and medium-sized enterprises (SMEs) have lower implementation rates due to greater labor cost burdens compared to large companies.
  • By industry, implementation rates are lower in fields with high physical labor such as manufacturing and construction.

• Companies support legislation but are reluctant about mandatory obligations. Key characteristics include:

  • 70% of companies responded that they support making continued employment into law.
  • However, they prefer "duty to make efforts" (closer to voluntary) rather than "legal obligation."
  • Companies cite securing flexibility in personnel management and balancing jobs between generations as main reasons.
  • Many responded that they would be more willing to implement if government subsidies or tax benefits were available.

📕 Limitations of Rehiring After Retirement

• Rehiring is less favorable for senior workers than extending retirement age. Main problems include:

  • Wages often decrease significantly compared to previous levels when rehired after retirement.
  • Contract periods are short at 1-2 year intervals, resulting in low job security.
  • There are cases of discrimination in welfare benefits and promotion opportunities compared to regular employees.
  • Employment periods are interrupted, potentially causing disadvantages in calculating severance pay.

• There is a large gap in treatment between extending retirement age and rehiring. Main differences include:

  • Extending retirement age maintains existing working conditions, keeping wages and welfare stable.
  • Rehiring involves signing a new contract, leading to wage renegotiation.
  • From companies' perspective, rehiring is preferred as it helps reduce costs.
  • From senior workers' perspective, problems arise as treatment worsens while doing the same work.

📕 Institutional Challenges

• Insufficient connection with addressing income gap period. Main problems include:

  • An income gap period occurs between retirement age 60 and pension receipt at 63-65.
  • Continued employment should fill this gap, but implementation rates are low.
  • The fact that early old-age pension recipients exceeded 1 million shows people cannot endure the gap period.
  • Connection between continued employment system and pension system is not systematically made.

• Insufficient support for SMEs. Main challenges include:

  • SMEs have less capacity to bear labor costs compared to large companies, making continued employment implementation difficult.
  • While elderly employment subsidies exist, amounts and targets are limited.
  • Government support and tax benefits need to be expanded to encourage SME participation.
  • Customized support measures considering industry characteristics are needed.

💡 Key Issues of Continued Employment

1. Labor Cost Burden: 52% of companies reluctant to implement system due to costs
2. Disadvantage of Rehiring: Rehiring after retirement has lower wages and job security, unfavorable for workers
3. Debate on Mandatory: Differences in stance between mandatory obligation and duty to make efforts
4. SME Burden: Harder to implement due to less financial capacity compared to large companies
5. Lack of System Connection: Insufficient systematic connection with pension system

3️⃣ Reasonable Improvement Measures

✅ Continued Employment System Design

• Gradual legislation is needed. Key directions include:

  • Rather than immediate mandatory obligation, start with duty to make efforts and gradually expand.
  • Ease burden on SMEs by differentiating implementation timing by company size.
  • Grant flexibility by allowing companies to choose among extending retirement age, rehiring, or abolishing retirement age.
  • Evaluate system effectiveness after a certain period and review expanding scope of obligation.

• Protection of treatment during rehiring must be strengthened. Main tasks include:

  • Establish standards to guarantee reasonable wage levels even when rehiring after retirement.
  • Apply equal pay for equal work principle to prevent unfair discrimination.
  • Enhance job security by guaranteeing contract periods of at least 2 years.
  • Develop measures to reduce gaps in welfare benefits compared to regular employees.

✅ Expanding Support for Companies

• Elderly employment subsidies should be expanded. Key measures include:

  • Increase government subsidies for companies implementing continued employment.
  • Provide additional support to SMEs to ease labor cost burdens.
  • Expand tax benefits to increase companies' participation incentives.
  • Simplify subsidy application procedures to improve ease of use.

• Create elderly-friendly work environments. Key directions include:

  • Create work environments considering senior workers' health and physical strength.
  • Expand flexible work arrangements such as part-time work and remote work.
  • Support job redesign for senior workers to maintain productivity.
  • Support workplace improvements to prevent safety accidents.

✅ Connection with Pension System

• System connection to address income gap period is needed. Main tasks include:
  • Connect continued employment period with pension receipt starting age to eliminate gap period.
  • Allow pension premiums to be paid during continued employment to increase pension amounts.
  • Introduce gradual retirement model combining partial pension and partial work.
  • In the long term, align retirement age and pension receipt age through system reform.

4️⃣ Related Terms Explained

🔎 Retirement Age System

• The retirement age system means employment contracts end when reaching a certain age.
  • The retirement age system refers to a system where workers automatically retire when reaching a certain age. According to Korea's "Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion" amended in 2013, employers must set the retirement age at 60 or older if they set one. If the retirement age is set below 60, it is considered as set at 60.
  • The purposes of introducing the retirement age system include: First, maintaining job balance between generations to promote youth employment. Second, resolving personnel bottlenecks to maintain organizational vitality. Third, helping workers prepare for retirement by making retirement timing predictable. Fourth, providing companies with predictability in workforce planning.
  • However, there are also problems with the retirement age system. Skilled workers retire early even when they still have working ability. Labor shortage problems worsen in an aging society. Income gap periods occur if retiring before pension receipt starts. To address these issues, extending retirement age or introducing continued employment systems are being discussed.

🔎 Rehiring System

• Rehiring is a method of employing retirees again.
  • The rehiring system refers to a method where companies employ workers again who retired upon reaching retirement age. Since it formally involves retirement first and then signing a new employment contract, employment periods are interrupted and wages and working conditions are renegotiated.
  • Characteristics of rehiring include: First, new contracts are often concluded at lower wage levels than before. Second, contract periods are short at 1-2 year intervals, resulting in low job security. Third, from companies' perspective, it is preferred over extending retirement age due to labor cost reduction effects. Fourth, from workers' perspective, problems arise as treatment worsens while doing the same work.
  • Japan has been mainly using the rehiring method since mandating continued employment system in 2013. While the obligation to secure employment until age 65 increased employment rates for senior workers, problems of wage decline and irregular employment also appeared. If Korea adopts rehiring methods, institutional mechanisms to protect treatment are needed.

🔎 Duty to Make Efforts

• Duty to make efforts is an obligation in the form of recommendation rather than compulsion.
  • Duty to make efforts refers to a method where the government recommends companies to voluntarily pursue implementation of certain systems rather than forcing them. While there is legal binding force, there are no direct sanctions for violations, making it practically close to voluntary.
  • Characteristics of duty to make efforts include: First, while imposing obligation to implement systems on companies, enforcement is weak. Second, it is a gradual approach considering difficulties of companies like SMEs. Third, it is a phased method of expanding scope of obligation after system takes root. Fourth, it induces voluntary participation by linking with government support.
  • The reason companies prefer duty to make efforts in continued employment legislation is that they can secure flexibility in personnel management while responding to social pressure for system implementation. However, there are also criticisms that duty to make efforts alone has low effectiveness and should be converted to obligation in the long term. Measures to gradually expand scope of obligation along with expanded government support are being discussed.

🔎 Act on Elderly Employment Promotion

• The Act on Elderly Employment Promotion is a law guaranteeing employment opportunities for seniors.
  • The "Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion" (abbreviated as Act on Elderly Employment Promotion) is a law enacted to prohibit discrimination based on age and expand employment opportunities for seniors. It was enacted in 1991, and through 2013 amendment, mandatory retirement age of 60 or older was introduced.
  • Main contents of the law include: First, employers must set retirement age at 60 or older if they set one. Second, discrimination based on age in recruitment, hiring, dismissal, etc. is prohibited. Third, support systems for companies employing seniors are stipulated. Fourth, employment promotion projects such as senior job banks and selection of occupations suitable for seniors are promoted.
  • The government is currently reviewing whether to introduce mandatory continued employment system through amendment of this law. The amendment bill may include content mandating companies to secure employment until age 65. However, social consensus is needed as there are differences in stance between labor and management regarding obligation level (mandatory obligation vs. duty to make efforts), implementation timing, and application method by company size.

5️⃣ Frequently Asked Questions (FAQ)

Q: If continued employment becomes mandatory, must all companies extend retirement age?

A: It is not necessarily only extending retirement age, but can choose from various methods.

• The continued employment system includes various methods such as extending retirement age, rehiring after retirement, and abolishing retirement age. Even if legislation is enacted, it is being discussed in the direction of granting flexibility by allowing companies to choose one of these. In Japan's case, since mandating employment security measures until age 65 from 2013, about 80% of companies chose the rehiring method.
• However, protective measures are needed to prevent senior workers' treatment from unfairly declining regardless of which method is chosen. To prevent rehiring methods from being abused as means of wage cuts, application of equal pay for equal work principle, minimum wage guarantee, setting minimum standards for contract periods, etc. should be discussed together. Customized system design considering company size and industry characteristics is important.

Q: What happens to National Pension if working through continued employment?

A: If continuing to pay pension premiums while working, the pension amount received later increases.

• If continuing to work through continued employment after age 60 and having income, you can continue paying National Pension premiums. In this case, the enrollment period increases and payment amounts also increase, raising the old-age pension amount received later. If continuing to work until pension receipt starting age, you can receive pension without income gap period, helping retirement income stability.
• Additionally, using the "deferred pension" system that delays pension receipt increases pension amounts. Deferred pension increases pension amounts by 7.2% for each year of delay, with maximum delay of 5 years possible. If deferring pension receipt while having income through continued employment, you can receive more pension after retirement. It is important to decide optimal receipt timing considering individual health status, expected lifespan, economic situation, etc.

Q: Can continued employment system be implemented in SMEs too?

A: Since SMEs have large labor cost burdens, government support and gradual implementation are needed.

• SMEs have higher proportion of labor costs in total costs compared to large companies, making continued employment burdens heavy. Therefore, even if continued employment is legislated, it is realistic to apply different implementation timing and methods by company size. Measures are being discussed to implement in large companies first and defer for SMEs for certain periods, or start with duty to make efforts and gradually expand.
• Government support is essential to encourage SME participation. Labor cost burdens must be eased through expanding elderly employment subsidies, reducing social insurance premiums, tax benefits, etc. Additionally, practical help is needed such as support for elderly-friendly workplace improvement costs and job redesign consulting. It is also important for government to discover and spread cases of excellent SMEs implementing continued employment to create atmosphere for voluntary participation.

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