Homeplus workers fear unpaid severance as bankruptcy looms

A Homeplus store in central Seoul [Herald DB]

The shadow of unpaid severance is falling over Homeplus amid the collapse of its court receivership proceedings. With the cash-strapped retailer having already delayed one round of severance payments and no sign of fresh funding on the horizon, industry watchers are warning of a mass wage and severance default that could dwarf last year's Tmon-WeMakePrice crisis.

According to industry sources Wednesday, Homeplus operates both a defined-benefit (DB) and a defined-contribution (DC) retirement pay system. Under the DB plan, the company manages the funds; under the DC plan, contributions go into individually managed accounts. The concern centers on DB plan members, whose fund reserve ratio has fallen below the legally required minimum of 100 percent. Homeplus has not made retirement fund contributions since 2024, and the reserve ratio is understood to have slipped to the low 70s this year.

Before filing for court receivership, Homeplus had been converting employees each quarter from the DB plan to the DC plan. Union members were the primary targets of those conversions, but a significant number of workers chose to remain on the DB plan. "Many employees have been with the company for more than 20 years, so the severance amounts involved are not small," a source familiar with the company's internal affairs said. "In the worst case, there is a real possibility that some workers will not receive the remaining 30 percent."

Delayed severance payments have already materialized. On Thursday, Homeplus posted a notice stating that "due to the company's current lack of funds, the scheduled payment of retirement benefits and company-side severance pay has unavoidably been delayed." The affected workers are those who retired in mid-June. The delay came after a 200 billion won ($131 million) debtor-in-possession loan fell through, leaving the company unable to meet the legally required 14-day payment deadline.

In anticipation of severance defaults, the government had earlier set a policy to advance up to 21 million won per worker. It also offers a low-interest livelihood loan of up to 10 million won per person at an annual rate of 1.5 percent, within the scope of unpaid wages. However, any amount beyond the government's support ceiling may be unrecoverable. Once the termination of court receivership is confirmed and the company proceeds to bankruptcy, workers would not even be able to file a civil lawsuit — meaning any unpaid amounts would effectively vanish.

Wages and severance pay are ordinarily the top priority for repayment regardless of receivership proceedings, but the prevailing view is that recovery cannot be guaranteed given the extensive collateral held by creditors including Meritz Financial Group.

The industry fears a mass wage and severance default that would surpass last year's Tmon-WeMakePrice crisis. The total unpaid wages confirmed through the prosecutors' investigation in that case amounted to 26 billion won. At Homeplus, June wage arrears alone have reached 33.3 billion won.

Meanwhile, the Ministry of Employment and Labor set up a dedicated task force at its Seoul Southern District Office late last year and has been closely monitoring the situation, given that a severance default could become reality at any moment. In connection with wage arrears from March through May this year, the ministry filed criminal charges against Homeplus management for violations of the Labor Standards Act.

The entrance to Homeplus headquarters in Gangseo-gu, Seoul, is closed. [Yonhap]

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