[THE INVESTOR] Industrial Bank of Korea, Korea’s sixth-largest lender in assets, is considering restarting a voluntary retirement program after a two-year hiatus as part of efforts to promote youth employment, according to media reports on Feb. 5.
The bank owned by the Korean government is in talks with the Ministry of Strategy and Finance about the resumption of the voluntary retirement scheme, which has been implemented by many commercial banks in Korea to cut costs and buttress bottom lines.
“We’re discussing with the Finance Ministry to restart a self-retirement plan subject to those who are subject to the wage peak program,” an official at the bank said.
If implemented, a total of 140 of IBK’s employees who were born in 1962, turning 55 this year, are expected to be subject to the wage peak scheme under which employees are supposed to get less pay from the age of 55 to the retirement age of 60.
The last time IBK carried out such a program was in 2015, but the ministry that controls the budget and hiring of the lender has disapproved of the scheme, citing fairness among other public financial institutions.
Public financial institutions such as the Export-Import Bank of Korea and Korea Development Bank have the wage peak system while commercial banks have both programs.
In 2017, 207 employees of KEB Hana Bank, 534 of NH Nonghyup and 1,011 of Woori Bank left the banks under the voluntary retirement scheme.
Banks usually pay the equivalent of between 27 and 36 months of salary depending on their rank and labor contract.
The change in stance toward the voluntary retirement scheme came as the new government beefs up efforts to create more jobs for young people, which has been emphasized by President Moon Jae-in.
Some suggest that the voluntary retirement program could reduce a clog in the employment pipeline as baby boomers retire early.
Ha Yung-ku, former Citibank Korea CEO and former head of the Korea Federation of Banks, an association representing Korean banks, told Choi Jong-ku, the Financial Services Commission, in November last year that public financial institutions need to adopt the voluntary retirement scheme.
“Companies conduct both the wage peak and voluntary retirement schemes and by doing so they give employees choices and create new jobs,” Ha said.
By Park Ga-young (firstname.lastname@example.org)