One of my employees wants the company to pay an interim settlement of retirement allowance because he needs to buy a house. Currently, he is in his 10th year of continuous service and is asking me to pay him his retirement allowance for the first 5 years of his employment. If an employee asks for an interim settlement of retirement allowance, do we have to grant it? And can an employee decide on the interim settlement period at will?
In order to protect the purpose of old-age security, the law provides the following reasons as acceptable for an interim settlement of retirement allowance:
1. Where a worker who is a non-homeowner purchases a house in his/her own name;
2. Where a worker who is s non-homeowner pays a tenancy deposit under Article 303 of the Civil Act or a security deposit under Article 3-2 of the Housing Lease Protection Act for residential purposes. In such cases, the number of such occurrences shall be limited to one time while the worker works in the same business;
3. Where a worker pays the medical care costs incurred for convalescence from illness or injury of any of the following persons who contributes at least 125/1000 of his/her total household annual wage and which requires at least six months of convalescence:
(a) The worker himself/herself;
(b) The spouse of the worker;
(c) A family member dependent on the worker or on the spouse of the worker;
4. Where a worker is declared bankrupt pursuant to the Debtor Rehabilitation and Bankruptcy Act within five years counted retroactively from the date he/she applies for interim settlement of a retirement allowance;
5. Where a worker receives a decision to commence individual rehabilitation procedures pursuant to the Debtor Rehabilitation and Bankruptcy Act within five years counted retroactively from the date he/she applies for interim settlement of a retirement allowance;
6. Where an employer implements a system of reducing wages based on a particular age, length of consecutive service, or amount of wage through a collective agreement, employment rules, etc. on the condition of extending or guaranteeing the current full retirement age;
6-2. Where an employer has shortened a worker’s contractual working hours by at least one hour a day or five hours a week under agreement with the worker, and the worker has agreed to continue to work for at least three months under the shortened contractual working hours;
6-3. If the severance pay of the worker is reduced due to a reduction of the working time pursuant to enactment of the revised Labor Standards Act, Act No. 1551;
7. Other cases falling under the grounds and requirements determined and publicly notified by the Minister of Employment and Labor, such as where damage is caused by a natural disaster, etc.
However, even if a worker meets the requirements for interim settlement of retirement allowances, the employer is not obliged to make the interim settlement, and if rejected, there is no violation of the law. In the event that the employer pays the retirement allowance in advance, he/she must keep the relevant documents until the fifth year after the employee’s retirement.
If a worker requests, the employer is allowed to pay the retirement allowance for the “period of continuous work” prior to retirement of the worker. In this case, the “period of continuous work” does not mean the entire period up to the time of the request. Therefore, even if you meet the demands of the worker, there will be no violation of the law. The Ministry of Employment and Labor interprets that an agreement can be made between employee and employer since there is no specification of period covered by an interim settlement of retirement allowance.