As the voluntary resignation fever has started, numerous commercial banks, including credit card companies, are offering retirements by guaranteeing high severance pay as compensation. In 2023, more than three thousand people are estimated to resign voluntarily, which far exceeds the 2,244 applicants last year. As corporations are choosing to reduce their workforce due to the economic downturn, the Sungkyun Times (SKT) would like to discuss the current situation regarding voluntary resignation and its various perspectives.
What Is Voluntary Resignation?
Voluntary resignation refers to when a company accepts retirement requests from employees and provides compensation that exceeds statutory severance pay to reduce the workforce. Recently, due to the reduction of retail finance stores and the financial digitalization of the banking sector, more banks are encouraging resignation. According to Dong-A Ilbo, the number of voluntary retirees in 2022 increased between 2,000 to 3,000 compared to the years when the stats stayed in the hundreds. Nowadays, even employees in their 30s or 40s are deciding to quit their jobs early. In the case of Shinhan Bank, the target age of voluntary resignation has expanded to those over the age of 44. Accordingly, employees are deciding to leave based on the belief that they cannot prepare for old age solely with their salary. In particular, as the need for financiers increases in big-tech companies, the number of young employees who switch jobs through voluntary resignation is also growing. This is because hold of a large sum of money is attractive for employees who wish for a stable future. However, the option is a double-edged sword for some as changing jobs after retirement is becoming difficult due to the shrinkage in the job market and a noticeable reduction in the workforce. According to a survey released last December by the Middleaged Job Center of the Federation of Korean Industries, 65.6% of 1,020 middle-aged job seekers wish to work even after the age of 70 but go through difficulty finding jobs again. Hence, the SKT would like to take a look at the situation of the gradually increasing number of voluntary retirees without the establishment of proper measures.
Different Perspectives of Voluntary Retirement
Positive Perspectives
The Finance Independence, Retire Early (FIRE) movement is a group of people who supports voluntary retirement. These supporters view early retirement in a bright light and wish to achieve financial independence at a young age. According to a 2021 survey of NH Investments & Securities, the average age of FIRE proponents in Korea is approximately 51, which aims to save around ₩1.37 billion per person. Significant retirement funds made by the current financial boom are the main reason for bank employees to quit since they can earn through heavy investments. Moreover, labor shortages in Financial Technology (FinTech) companies such as Kakao Bank also encourage their retirement. As people are delaying childbirth, employees with young children are moving to FinTech companies to pay off loans with retirement funds and prepare for their second act of life. This process occurs because the working conditions and wages of the banking sector are higher than in other industries. In addition, many banks provide retirees with children’s school expenses of ₩3.5 million per semester, up to ₩34 million for reemployment support, and even rehiring opportunities a year after retirement. Kim Young-tae, a 57-year-old employee preparing to leave the banking sector, said he wants a new working environment where managing his schedule while preparing for old age is possible. Thus, voluntary retirement is not merely a phenomenon of workers refusing jobs but also a transition period in which they leave for new and better opportunities.
Negative Perspectives
Due to the prolonged recession, some companies use voluntary resignation as a form of restructuring. Offering retirement only to those who wish it seems like a plausible excuse, but in reality, there are cases where employees get pressured to leave their positions. Workers have difficulty resisting when a company justifies targeting and oppressing retirees by offering compensation. A coercive method can be urging retirement with a resignment list or creating disadvantages such as suspension and transitional assignments. Furthermore, companies are starting to include young employees in their 20s and 30s as targets for voluntary retirement. According to an interview with Hankyoreh News, Kim Kwan-woo, an assistant manager of a mid-sized company, said, “I was unfairly targeted for voluntary retirement and had to leave the company in just two days after I was notified.” Kim insisted that he then faced difficulties in finding a new job, with the search lasting for a year and a half. He even said he witnessed workers of a similar age who were pushed into early retirement. Therefore, though voluntary retirement seems to be a result of an agreement between two parties, in many cases, employees are forced to terminate their contracts. When a personnel has been forced to retire, filing a claim at the Labor Relations Commission or asking for compensation for damages is possible with evidence of the unfair process. However, it is still unlikely for employees to win the case against corporations, leaving so many of them beleaguered, thinking whether to give up and leave.
Ways to Improve
How the Government Should Respond
Workers who wish to voluntarily retire do exist. Not all voluntary retirement should be seen as a forced decision. Even so, the fundamental problem is employment recession, and it should be resolved for them to prepare for old age. The government should therefore strengthen customized employment services through economic measures based on the recovery of private-sector employment. To prepare for this year’s recession, authorities of the joint employment task force have been established as the first employment-related agencies and are planning mid to long-term measures to solve employment issues. The most noticeable policy for voluntary retirees is the 2023 Recruitment of Middle-aged Experienced Workplace project, which provides a workplace for unemployed people between the ages of 50-69 and supports reemployment in their local communities. Ha Hyeong-so, Director General of Integrated Employment Policy, said in Aju Business Daily, “We will strengthen the function of the project as a stepping stone for middle-aged workers to move from public to private business sectors.” However, the statutory limitations on what specific procedures to implement for voluntary retirements are still vacant. Particularly, as cases in resignment grew since the enactment of the legal retirement age of 60, the legislation should be appropriately managed considering the issue. The most vital task is to create an environment where the elderly can engage in the labor market through vocational training and recruitment assistance services.
How Corporations Should Change
Legal improvements must be made to hold corporations accountable for retiring workers. After the Employment Promotion for the Aged Act was revised in 2020, companies that hired over 1,000 workers had to mandatorily provide job training and employment opportunity if an employee aged 50 or older involuntarily left their position. Nevertheless, since Korean companies lack outplacement services, they must further expand these measures. For corporates, outplacement services can prevent workers from jumping ship to competitors while instilling a secure image for the remaining members. In the long term, the service can positively impact the company’s image and recruitment. Regarding this point, Kim Young-tae suggested that companies should mandatorily provide outplacement services to those that voluntarily retire as their position in the workplace might hinder them to ask for help. Furthermore, it would be easier to shift jobs if services functioned as a bridge to other workplaces. Currently, the consulting industry is developing an Artificial Intelligence (AI) outplacement service that provides an estimation of the re-employment period, job duties, and salaries when employees enter personal information. As the systemic understanding of companies and workers is gradually improving, and the target of legal obligation might even expand to smaller-sized corporations and public institutions, the outlook of outplacement services seems bright.
Is voluntary retirement on your mind? It is important to decide when you have had enough time to prepare for your second stage of life. Once you have decided to leave, utilizing various outplacements could be helpful. Because ultimately, there is a high possibility of failure without enough preparation put into consideration. The SKT hopes Kingos will start pondering about the next chapter of their life wisely.