LABOR LAW GUIDE

Chapter 8 Retirement Management

Section 1: Retirement Age System

Ⅰ. Concept

The retirement age system is a system whereby the employer-employee relationship is terminated when an employee reaches the appropriate retirement age as stipulated by the rules of employment or an employment contract, regardless of any intention on the part of the employee to renew the employment contract or his/her ability to work. Previously, Korean labor law regarding retirement age gave only a recommendation, not a compulsory stipulation, but a statutory retirement age system became effective in May of 2013. Accordingly, any retirement age system that had considered retirement age to be lower than 60 years of age became null and void, and retirement age was automatically set to 60. In addition to this, a rank-based retirement age system is now considered justifiable if it was the result of a labor-management agreement, but with introduction of the statutory retirement age system, any retirement age set lower than 60 years of age is now invalid. In situations where a company that did not previously have a retirement age regulation introduces one due to the compulsory retirement age law, it is recognized that this can be a disadvantageous revision of working conditions, and such unilateral revision is invalid as well.

[Act on Prohibition of Age Discrimination in Employment & Elderly Employment Promotion, May 22, 2013]

Article 19 (Retirement Age) ① When an employer sets a retirement age, he/she shall set it at 60 years of age or older.
② Regardless of Subparagraph ①, in cases where the employer has previously set a retirement age at lower than 60 years of age, his/her retirement age policy shall be regarded as having been set at 60 years of age.



Ⅱ. Application of the Statutory Retirement Age System

1. In cases where a company has a previously-established retirement age lower than the statutory retirement age

Any retirement age that was previously established at lower than the statutory age of 60 years is null and void due to enforcement of the statutory retirement age, and such invalid retirement age system will be revised so it is in accordance with the compulsory retirement age of 60 years. Accordingly, any such previous retirement age system that a company has stipulated in their regulations is null and void due to introduction of the statutory retirement age, and that statutory retirement age shall become the company’s retirement age.

2. In cases where a company which did not previously have a retirement age establishes one due to introduction of the statutory retirement age

1) Judicial ruling: In a situation where a transportation company that did not have a regulation for retirement age established a retirement age, the company’s employees could have worked without any age restriction until such time as the company established a retirement age regulation. Once the company established the retirement age regulation, only those employees who passed a review committee could work past the retirement age. This introduction of a retirement age regulation is considered to be an unfavorable change in the working conditions, because it deprives employees of their existing rights and interests.

2) Judicial ruling: Certain employees had worked continuously without any age limitation until their employer established a new retirement age regulation. Because of this new regulation, employees who reached 60 years of age could continue to work as daily workers afterwards. Therefore, this new regulation of the retirement age deprives the employees of their rights and interests, and is considered a disadvantageous revision of working conditions.

3. In cases where a company continues to employ employees after reaching retirement age

If an employee has continued to work with the employer’s implied consent after reaching retirement age, the employer cannot terminate employment just because the employee has exceeded the retirement age unless there are special circumstances. When re-employing retirees after their retirement age: if the contract period is fixed, expiration of such contract period is reason to terminate employment; if the contract period is not fixed, it is possible to dismiss the employee only when there is a justifiable reason for dismissal.

4. In cases where the company has a rank-based retirement age system under the statutory retirement age system

If the retirement age can be regulated differently in accordance with title or rank within the workplace, and if the company has established reasonable criteria regarding work characteristics, content, and type of work that the employees provide, the company can then regulate the retirement age by rank(rank-based retirement age system) or as tenure-based employment that cannot be renewed(the tenure-based retirement age system). The company can also implement two retirement age systems at the same time: a general retirement age system and a rank-based tenure system. However, this regulation becomes null and void once the statutory retirement age is introduced, but is possible and valid for the period exceeding the statutory retirement age.

5. In cases where an employee is undergoing medical treatment

In cases where an employee is receiving medical treatment due to an occupational accident, the employment relationship shall be continued up to the retirement age.

6. In cases where the company has hired an employee older than the retirement age at the age of hiring

In cases where the company was aware that the employee was older than the retirement age stipulated by the rules of employment, and hired the employee anyway, it is unfair to dismiss the employee due to the retirement age in the rules of employment.

7. Retirement age and retirement date

The retirement date shall be clearly stipulated in order to prevent dispute between employer and employees. If the retirement date has not previously been stipulated, but has habitually continued on a certain day in practical repetition, such habitual practice is the date of termination. In the following samples, I clarify the appropriate retirement dates in various situations for an employee born on April 1, 1958
1) If the retirement age was stipulated as 60 years of age, the retirement date becomes the first day exceeding 60 years of age, which means April 1, 2018.
2) If the retirement date is the first day of retirement age, the effective date would be April 1, 2018.
3) If the retirement date is stipulated as the last day of the month after reaching retirement age, the retirement date would be April 30, 2018.
4) If the retirement date is stipulated as the last day of the quarter after reaching retirement age, the retirement date would be July 30, 2018.
5) If the retirement date is the last day of the first half-year after reaching retirement age, the effective date would be June 30, 2018.
6) If the retirement date is the last day of the year when retirement age is reached, retirement becomes effective on December 31, 2018.
7) If the retirement date is the last day of retirement age, the effective date would be March 31, 2019.

For further questions, please
call (+82) 2-539-0098 or email bongsoo@k-labor.com

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