I. Statutory Retirement Age


1. Introduction

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 went into effect 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 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 at less 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 introduction of 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.

This revision includes both introduction of the statutory retirement age and the necessary measures to revise the wage structure, but in actual practice, only the statutory regulation will be applied to companies. Because a revision of the wage structure could result in disadvantageous conditions, it requires agreement from the employee representative (or the representative of the labor union representing a majority of employees).

2. Applications 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 the 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 (Supreme Court ruling on May 16, 1997, 96da2507): 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 (Busan District Court ruling on Sept. 7, 2007, 2007gahap2704): The employees had worked continuously without any age limitation until the company established a new retirement age regulation. Because of the new retirement age 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 to be a disadvantageous revision of working conditions.

(3) In cases where a company continues to use 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, the expiration of such contract period is reason to terminate employment; and if the contract period is not fixed, it is possible to dismiss the employee only when there is a justifiable reason for the 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) (Supreme Court ruling on Apr. 9, 1991, 90da16245). The company can also implement two retirement age systems at the same time: a general retirement age system and a rank-based tenure system (Labor Standard Team-856, Oct. 31, 2005). 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 (Gungi 01254-9824, July 6, 1991).

(6) In cases where the company has hired an employee who was 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 (Gungi 68207-658, Apr. 18, 1994).

(7) Retirement age and retirement date

The retirement date should be clearly stipulated in order to prevent dispute between the 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 reaching 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.

3. Changes to Wage Structure and Introduction of the Peak Wage System(1) Changes to wage structures

As the wage structures of Korean companies are mostly based on seniority-based salary systems determined by service years, the extension of retirement age creates an additional financial burden on employers. Because of this, Subparagraph 1 of Article 19-2 stipulates: “The employer of a business or workplace who extends the retirement age, and the labor union which is formed by the majority of all workers (or a person representing the majority of all workers if such a labor union does not exist) shall take the necessary steps to revise the wage system, etc. according to the conditions of the business or workplace concerned.” This provision explains that, while the employer should change the wage structure to adjust to the statutory retirement age of 60 years, in cases where this change is connected to productivity and performance (a job-based salary system), the employer shall obtain agreement from the majority of employees at the workplace concerned, just as for a procedure requiring a disadvantageous change of working conditions. In cases where the employer makes unilateral changes to the wage structure, the changes do not apply to existing employees, but only to those hired after the rule change was made. Provided, that if the disadvantageous change in wage structure is recognized as reasonable in social norms in both its necessity and content, the change of rules is applicable to target employees even without the employer receiving consent from the majority of employees concerned. Here, the acceptable reasonableness in social norms is significantly restricted. The related Supreme Court ruling (on Jan. 28, 2010, 2009da32362) states: “In principle, it is not permissible for the employer to establish or revise the rules of employment unilaterally, to deprive existing rights or interests that employees previously obtained, or to apply disadvantageous working conditions. However, when establishing or revising the rules of employment becomes necessary enough to recognize the acceptable rationality in social norms in terms of both necessity and content, such application cannot be denied just because the company did not receive consent from the majority of employees for whom the previous working conditions or rules of employment had applied. On the other hand, whether there is reasonableness according to social norms as mentioned here shall be collectively judged by considering: 1) the degree of disadvantageous conditions affecting employees as a result of the revision of the rules of employment, 2) the degree and details of the employer’s necessity for change, 3) reciprocity of the content in the rules of employment after revision, 4) improvement of other working conditions, including the employer’s measures having equivalent effect, 5) procedures for collective bargaining with the labor union and reaction from the labor union or other employees, and other general situations within the company regarding this issue. Provided, that this exceptional stipulation shall be significantly restricted in application, as this measure actually precludes the requirement under the Labor Standards Act that the employer shall receive consent from the majority of employees when revising the rules of employment disadvantageously.”

(2) Introduction of a peak wage system

The peak wage system is a method of reducing labor costs in return for extending the retirement age in seniority-based wage systems, which are not connected to productivity and wage. Since the statutory retirement age is determined to be 60, the peak wage system is only applicable during the period exceeding the retirement age previously determined through mutual agreement between labor and management or individual reemployment. Introduction of the peak wage system for the period within the statutory retirement age becomes a disadvantageous revision of working conditions and requires consent from the representative of the labor union representing the majority of employees (or the employee representative in case there is no such labor union). Without this procedure, it is not possible to reduce wage levels in return for extension of the retirement age once the statutory retirement age is introduced. Accordingly, introduction of a peak wage system within the statutory retirement age is considered a disadvantageous revision of working conditions and requires the collective consent of the corresponding employees.




II. Prohibition against Age Discrimination

1. Purpose

Prior to March 21, 2009, the Promotion of Employment of Older Workers Act contained articles prohibiting discrimination against older workers at time of recruitment, employment and when considering dismissals, but there were no penal provisions. Revision of this Act has introduced general guidelines regarding age discrimination, such as a general prohibition against it, exceptions, correction orders, fines for negligence, etc. The name of the Act was also changed to Prohibition of Age Discrimination in Employment, and Promotion of Employment of Older Workers Act.

Employers shall not discriminate against an employee based on age, without a justifiable reason, in each of the following areas: 1) recruitment and employment; 2) provision of wages and valuables aside from wages, and benefits packages; 3) education and training; 4) disposition, change of position and promotion; and 5) retirement and dismissal. If application of a standard aside from age, without justifiable reason, leads to a result particularly unfavorable to a certain age group, this shall be considered age discrimination. This Act shall apply to any workplace where an employer intends to hire, or has hired, one employee or more, and so this Act covers all legally employable age levels.

2. Details of Age Discrimination

(1) Concept of age discrimination

Age discrimination means that a certain person (or a group to which an employer belongs) under similar circumstances creates disadvantages for a person (or a group) of a different age.

(2) Justifiable reasons

The Act is violated when said person or group is discriminated against without justifiable reason. The concept of “reasonable” as general criteria of judgment to permit or prohibit discrimination shall be interpreted strictly. Namely, the difference (discrimination) of treatment due to age 1) shall be implemented to accomplish a justifiable purpose (justification of purpose). Being important under the corresponding circumstances can be interpreted as a “justifiable” purpose. The discrimination 2) shall be unavoidable (necessity of method). If it is possible to accomplish its purpose by using a reasonable method aside from age (if there is a reasonable alternative), using “necessity of method” as a defense is hard to justify. And 3) the principle of comparison between purpose and method shall be applied. In this case, it shall be appropriate to choose a certain age group to be disadvantaged if it is chosen according to the principle of comparison between purpose and method.

(3) Direct discrimination

Actions where employers discriminate based on age without justifiable reason are considered direct discrimination. “Discriminating based on age” means that the reason for the discrimination is the biological age of a certain person (or a certain group), and disadvantageous treatment applies to an employee (or group of employees) according to whether or not he/she/they have reached a particular age, whether an employee belongs to a group of a particular age or not, and relative difference in age.

(4) Indirect discrimination Indirect discrimination is when a standard is used, aside from age (namely, neutral standard), to disadvantage a certain group or employee.

Even though it seems non-discriminative externally, in practical terms, it leads to a result particularly unfavorable to a certain age group (namely, a disadvantage of some sort). So, indirect discrimination occurs when application of a neutral standard is not justifiable. Indirect discrimination also occurs when “a certain age group is treated unfavorably compared to another age group,” and this judgment of ‘disadvantage in result’ shall require a comparison between definable age groups.

(5) Examples of age discrimination at each level of employment

1) Recruitment and employment

A typical type of age discrimination occurring in recruitment and employment is to limit applicants’ ages (particularly maximum age) or to prefer a particular age group.

- Age limit in open applications for recruitment of 9th grade civil servants
- Age limit in applications for recruitment of female crew of domestic airline companies (Age limit of 25)
- Age limit in applications for recruitment of university employees (Age limit of 40)
- Age limit in open applications for recruitment of teachers (Age limit of 40)

2) Wages, valuables aside from wages, and benefits packages

Actions where employers discriminate between ages for determining wages, other valuables and benefits packages for people in similar positions, belong to direct discrimination. However, in cases where difference in number of service years reflects different job skills, degrees of responsibility, or difference in performance, and in cases where it is necessary to promote longer service, wage discrimination determined by the number of service years is not regarded as age discrimination and is accepted as reasonable discrimination.

3) Education and training

Employees shall be given equal opportunity for education and training, without discrimination based on age, as they are important methods to develop job skills and are closely related to human resource management and compensation. In selecting eligible employees for various education and training opportunities, like overseas training, if the employer excludes a certain age group based on age without objective and reasonable criteria, this action would fall under age discrimination.

4) Disposition, changes of position and promotion

The employer usually chooses eligible employees for disposition, changes of position, and promotion after considering various factors, such as job skills, organizational efficiency, teamwork, sense of responsibility, etc. Therefore, the employer’s discretion to evaluate and select eligible employees shall be respected, but if the employer, in evaluating and selecting these employees, disadvantages a certain employee or group based on age, this age discrimination is prohibited as an abuse of the employer’s discretion. In cases where the employer does not provide opportunity or applies disadvantageous conditions to a certain age group, without justifiable reason, in management of personnel disposition, promotion, etc., and in cases where a certain age group was collectively disposed to or transferred to disadvantageous jobs, or in cases where younger employees were treated preferentially, when compared to more eligible older employees, such acts are considered age discrimination. If there is a remarkable statistical difference between different age groups, discrimination can be suspected.

5) Retirement and dismissal

When an employer establishes criteria to dismiss a certain group of employees due to their advanced age, without considering other factors like job skills, performance, etc. in the process of employment adjustment, this action falls under age discrimination because the employer dismissed employees due to age. Where there is a close relation between service period and wages in the seniority-based salary system, dismissing employees simply because they have been employed a long time, and therefore receive high wages, will be considered indirect age discrimination.

(6) Exceptions to the prohibition against age discrimination

1) In cases where a certain age group is inevitably required in consideration of the characteristics of related duties
※ Example: set age limit for an applicant who shall carry out a young man’s role in a drama or movie
2) In cases where there is a difference in the continuous service period, a reasonable difference in wages, or money and valuables, and benefits packages aside from wages is appropriate.
3) In cases where the retirement age is set in the labor contract, work rules, or collective agreements, etc.
4) In cases where support measures are implemented to maintain and promote the employment of a certain age group as defined by law.

3. Penal Provisions

(1) Prohibition of age discrimination in recruitment and employment, and introduction of penal provisions - Employers who discriminate during recruitment and employment because of age, without a justifiable reason, shall be fined an amount not exceeding 5 million won.
(2) Any person who fails to carry out a correction order of the labor office shall be imposed a negligence fine not exceeding 30 million won.
(3) An employer shall not give disadvantageous treatment to an employee, such as dismissal, transfer, disciplinary action, etc., on the grounds that the employee has filed a petition, submitted materials, given answers and testimony, filed a lawsuit, made a report, etc. In violation of this article, the employer shall be punished by imprisonment for not more than two years or by a fine not exceeding 10 million won.

4. Procedure for Correction of Discrimination




III. Extension of Working Age for Manual Workers

1. Introduction

On February 21, 2019, the Supreme Court issued a ruling that extends the working age of ordinary manual workers from the current 60 to 65. The working age of manual workers went from 55 to 60 through another Supreme Court decision in 1989 and has remained there for the past 30 years. This most recent Supreme Court ruling in February 2019 will bring many changes to society.

In the immediate term, this change will use 65 years of age for calculating civil damage compensation for people who are not salaried workers such as the unemployed, minors, students, full-time housewives and general manual workers. However, considering that the working age of manual workers goes together with the statutory retirement age prescribed by the Elderly Employment Act, which was set at 60 years in 2013, extension of the working age for manual workers to 65 years will influence society in a great number of ways, in terms of not only changing compensation for damages, but also lending momentum to further extending the statutory retirement age. It is especially related to the low birth rate and societal aging in Korea. The proportion of the population aged 65 or older in Korea reached 14.3% in 2018, which makes the nation an “aged” society, and will reach 20% in 2025, when it will be considered a “super-aged” society.

2. Details of the Court Ruling regarding Extended Working Age for Manual Workers

First of all, let us concretely examine the details of the Supreme Court's decision to extend working age for manual workers.

(1) Facts

On August 9, 2015, a 5-year-old boy drowned in a swimming pool. The parents claimed compensation for civil damages for violation of the pool owner’s and safety manager’s obligation of care. When calculating compensation for damages in first and appellate trials, the courts applied the wages of city daily workers from the time their military service ended for 21 months after the victim would have become an adult, to the age of 60. However, after a public hearing on November 28, 2018, the Supreme Court ruled on February 21, 2019, that it was unable to maintain the case rulings that the working age of manual workers had been accepted until the age of 60, in terms of the actual practices of physical labor, and instead extended the working age of those who provide physical labor to 65 years.

(2) Extension of working age for manual workers: effect on society

The Supreme Court’s ruling considers the changes in social and economic conditions in Korea, increased natural longevity, and institutional changes. In general, the decision on the maximum working age for a manual worker is determined by considering three things:

(i) biologically possible physical working age
(ii) the age at which manual labor is desired to work, and
(ii) to what extent a society can accept physical labor.

Using these standards, the Supreme Court specified the following seven items.

① At the time of the previous Supreme Court ruling (1989), the average life expectancy in the nation was 67.0 years for men and 75.3 years for women. In 2017, the average life expectancy for men was 79.7 years, and 85.7 years for women. ② At the time of the previous ruling (1989), the per capita GDP of Korea was USD 6,516, and had reached USD 30,000 by 2018. ③ At the time of the 1989 ruling, retirement age for railway, civil engineering, construction, and machine workers was mainly 58, but in 2013, this had been extended to 60 for most civil servants (including functional). In the private sector, the mandatory retirement age for all workers was set at 60 on January 1, 2017. According to a press release from the Ministry of Employment and Labor, the average retirement age at workplaces operating retirement age systems as of 2016 was 60.4 years. ④ According to OECD data, the actual retirement age is higher than the official retirement age in Korea. From 2011 to 2016, actual average retirement age was 72.0 years for men and 72.2 years for women, while the average among OECD members was 65.1 years for men and 63.6 years for women. Korea has the highest actual retirement age of all OECD member states. ⑤ The Employment Insurance Act applied to newly-hired persons under the age of 60 at the time of enactment on December 27, 1993, but also applies to those who have been employed or began self-employment at up to 60 years of age since its revision on June 4, 2013, while excluding those who are newly employed or began self-employment after reaching 60 years of age. ⑥ The age at which subscribers will receive national pension payments is gradually extending: to 61 years between 2013 and 2017, 62 years between 2018 and 2022, 63 years between 2023 and 2027, 64 years between 2028 and 2032, and 65 from 2033. As for government employees and teachers and staff at private schools, pension receiving age is 60 years until 2021, 61 years in 2022, 62 years in 2024, 63 years in 2027, 64 years in 2030 and 65 years in 2033. ⑦ Under the various social security laws, the age at which the nation must actively guarantee a livelihood is 65 years of age and older.



(3) Supreme Court decision

The Supreme Court dismissed the existing view that the working age of persons who do ordinary manual labor or those who mainly use manual labor for their livelihood is 55 years old in the case of an experienced person (99daka16867). Since then, courts have maintained the view that the working years of physical laborers must be until 60 years of age by the rule of law. However, as the socio-economic structure and living conditions of our country improved rapidly and the legal system improved, the basic views became more difficult to maintain as the circumstances that formed the basis for the above-mentioned empirical rules changed significantly. Now, as long as there are no special circumstances otherwise, it is reasonable to see that it is possible to work up to age 65.

3. Changes in the Legal Environment

Damage caused by illegal acts includes direct damages, indirect damages and consolation money. Direct damage refers to illegal activities that result in medical expenses, nursing care costs, funeral expenses, repair of damaged vehicles, and other expenses for the victim. Indirect damages refer to gains that could have been realized if the illegal act had not been committed. These include lost earnings during the working period and lost severance pay. In this regard, compensation for higher automobile insurance premiums and compensation for civil damages due to work accidents are directly affected.

(1) Automobile insurance damages

On May 1, 2019, the age limit for calculating compensation for damages was raised from 60 to 65 years. The contents of this report are as follows: (1) extended working age for death and disability, (2) consolation money calculation for death and disability, and (3) suspension allowance due to injuries.
For example, if a 35-year-old daily worker is killed in a traffic accident, he would theoretically have had 25 more years of work until his 60th birthday, so losses of 277 million won would have to be compensated. However, in the future it will be 30 years, and 320 million won would have to be compensated. The loss of work due to the fatality of a 62-year-old worker has been 0 won, but according to the revised law, it will be worth 14.5 million won.



(2) Estimated civil damages for industrial workers

In the event that an employee dies from an industrial accident, the company refers compensation to industrial accident compensation insurance. However, if the company is deemed partly liable, such as for failing to have sufficient safety measures in place, which resulted in the death of the worker, the company shall be liable for civil damages in addition to industrial accident compensation for the surviving family. The extent of the civil damages shall be the loss of the victim whose death has a significant causal relationship with the company’s negligence, while the scope of damages recognized are categorized as direct damage, indirect damage and mental damage. In general, if a worker dies, compensation shall cover the sum of medical expenses and funeral service expenses, lost work income (loss incurred from the time of death to the point of retirement) and a one-time retirement allowance (severance pay due to early retirement), and mental damage. Lost labor earnings used to be calculated up to the age of 60, but now will be calculated up to 65 years, which increases the amount of civil damage compensation.

4. Conclusion

As the working age of manual workers is raised to 65 years, insurance premiums are expected to increase along with the amounts of various forms of compensation, and discussions on extension of the statutory retirement age are expected to take off. Japan set its statutory retirement age at 60 in 1994, and 20 years later reset it to 65. In 2013, Korea set retirement age at 60 through the Elderly Employment Act. Nevertheless, when initial national pension payments are gradually extending to 65 years of age and when the maximum age for mandatory enrollment in employment insurance will also extend to 65 years, extension of the statutory retirement age in Korea will be inevitable in the near future. Therefore, companies should abolish their seniority-based salary systems, which is a factor in rising labor costs, and introduce job-based wage systems or wage peak systems that reflect the extended working period as a way to prepare for the extension of statutory retirement age.