![A textile factory in Ansan, Gyeonggi Province. [Yonhap]](https://wimg.heraldcorp.com/news/cms/2026/08/13/rcv.YNA.20260331.PYH2026033110700006100_P1.jpg)
"It is extremely hard to hire young people for production-floor jobs. From the company's perspective, it is great when skilled employees keep working past retirement age. But if the retirement age is raised across the board, the higher labor costs make it harder to bring in new hires."
Company A, a small manufacturing firm, continues to employ some of its production workers after they reach the mandatory retirement age — in at least one case, a worker stayed on until age 70. The company does so because recruiting young workers is difficult and the hands-on expertise of long-serving skilled workers is indispensable. "After retirement age, we decide whether to keep someone on by weighing their health, job performance and how much they are needed on the floor," an executive at the firm said.
Company B, an SME in Gyeonggi Province, faces a similar situation. "Having skilled employees continue working is good for the company, but circumstances differ from job to job," a company official said. "Right now we rehire a significant number of retirees on fixed-term contracts, but if the retirement age is extended, our burden from labor costs and industrial accidents will grow."
As debate over raising the retirement age intensifies, SMEs are caught between the need to retain skilled workers and the cost of doing so. Small firms — particularly those struggling to recruit young workers for production roles — have a strong incentive to keep experienced older employees on board. Yet an across-the-board retirement-age extension could trigger a range of side effects: higher labor costs, greater industrial-accident liability, generational friction in the workplace and a chilling effect on new hiring.
SMEs aging faster than large firms
According to a report released recently by the Korea Institute for Small and Medium-sized Enterprises and Startups, an estimated 1.77 million full-time workers aged 55 to 59 could be subject to a retirement-age extension over the next five years. Of those, about 1.48 million — 83.9 percent of the total — work at companies with fewer than 300 employees. Workers aged 59 alone at SMEs number roughly 275,000. Should a retirement-age extension become law, its impact would fall disproportionately on small and medium-sized businesses.
In practice, the workforce at SMEs is already aging rapidly. Last year, workers aged 50 and older accounted for 44.0 percent of all wage earners at SMEs — 18.7 percentage points higher than the 25.3 percent recorded at large companies. The pace of aging is also faster at small firms. In 2015, workers aged 39 and under made up 42.5 percent of SME wage earners; last year that share fell 7.4 percentage points to 35.1 percent. Over the same period, the share of workers aged 50 and older rose 12.4 percentage points, from 31.6 percent to 44.0 percent. At large companies over the same period, the share of workers aged 39 and under shrank by just 4.1 percentage points, while the share aged 50 and older grew by 5.5 percentage points.
Against this backdrop, post-retirement rehiring has already spread quickly across the SME sector. Among small firms that operate a mandatory retirement system, the share that also run a rehiring program rose 16.5 percentage points — from 23.9 percent in 2020 to 40.4 percent last year. By company size, firms with 30 to 99 employees had the highest rehiring rate at 60.1 percent, followed closely by firms with 100 to 299 employees at 59.9 percent. The rate was 46.6 percent at firms with 10 to 29 employees and 41.4 percent at those with five to nine.
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Mandatory extension a burden — SMEs want a choice
SME representatives agree, however, that extending the retirement age and rehiring workers after retirement are fundamentally different. Post-retirement rehiring allows companies to decide whether to keep a worker based on health, job performance and staffing needs, and to set new terms for wages and working hours. A formal retirement-age extension, by contrast, locks in existing pay and personnel structures, driving up costs.
At SMEs in particular, the adoption of wage-peak systems — which can cushion the labor-cost impact of a higher retirement age — remains low. A wage-peak system maintains employment past a certain age in exchange for gradually reducing pay, giving companies a way to manage labor costs. Implementing one, however, requires designing the scale of pay cuts, determining which workers and roles are covered, and overhauling the pay structure through labor-management negotiations. For SMEs, which typically have limited capacity for human-resources management, designing and running such a system is itself a burden. Only 16.3 percent of SMEs with a mandatory retirement system had adopted a wage-peak arrangement last year.
For this reason, voices within the SME community have consistently called for broadening employer choice — allowing companies to use a mix of approaches, including retirement-age extensions and rehiring, depending on their circumstances — rather than imposing a uniform extension. There are also calls for "intergenerational coexistence" support measures to ensure that retaining older workers does not come at the expense of hiring younger ones.
"Rather than focusing solely on extending the retirement age, we need to support companies in restructuring their pay systems and give them autonomy over how they continue employing older workers," said Noh Min-seon, a director at the Korea Institute for Small and Medium-sized Enterprises and Startups. "Incentives for companies that maintain or expand new hiring should also be strengthened," he added. "We also need to build a structure in which job security for older workers and the entry of new workers into the labor market do not come into conflict."
boo@heraldcorp.com
