Workplaces receiving elderly continued-employment subsidies drop 25% in 3 years

Firms with fewer than 50 workers fall from 2,400 to 1,613

Total recipients down 25.6%; firms with 50 or more workers up 21.7%

Concerns grow over small businesses being left out as government pushes mandatory retirement-age extension

Participants rally to demand legislation raising the statutory retirement age to 65 this year. [Newsis]

The number of workplaces receiving government subsidies for continuing to employ older workers past the retirement age fell 25 percent over three years, data showed Tuesday. The decline was particularly sharp among smaller businesses — those with fewer than 50 employees saw a drop of nearly 33 percent — while larger firms recorded an increase, highlighting a growing gap tied to workplace size.

The trend has raised concerns that smaller businesses, which face relatively heavier labor cost burdens, are losing the incentive to keep older workers on the payroll even as the government pushes to enshrine a higher retirement age in law.

According to data submitted by the Ministry of Employment and Labor to Democratic Party of Korea lawmaker Park Hae-cheol of the National Assembly's Climate, Energy, Environment and Labor Committee, the number of workplaces receiving the continued-employment incentive grant fell from 3,028 in 2022 to 2,271 last year, a decrease of 757 workplaces, or 25.0 percent.

Over the same period, the number of workers covered dropped from 7,994 to 7,698, a decline of 296, or 3.7 percent. Total payouts also fell, from 22.63 billion won ($16.7 million) to 20.49 billion won — a decrease of 2.14 billion won, or 9.5 percent.

[Provided by Rep. Park Hae-cheol's office]

The decline was most pronounced among smaller workplaces. Firms with fewer than 50 employees receiving the subsidy fell from 2,400 in 2022 to 1,613 last year, a drop of 787, or 32.8 percent. The number of workers covered at those firms also fell, from 4,290 to 3,192 — a decrease of 1,098, or 25.6 percent.

By contrast, workplaces with 50 or more employees grew from 628 to 658 over the same period, an increase of 30, or 4.8 percent. The number of workers covered at those firms rose from 3,704 to 4,506, up 802, or 21.7 percent.

The overall decline in covered workers was limited to 3.7 percent in large part because the expansion at larger firms offset much of the sharp contraction at smaller ones.

The share of covered workers at firms with fewer than 50 employees fell from 53.7 percent of the total in 2022 to 41.5 percent last year, a drop of 12.2 percentage points. The share at firms with 50 or more employees rose correspondingly, from 46.3 percent to 58.5 percent.

The sectoral composition also shifted.

In manufacturing, the number of participating workplaces declined from 1,523 in 2022 to 1,320 last year, yet the sector's share of all participating workplaces rose from 50.3 percent to 58.1 percent. The health and social services sector, meanwhile, saw its participating workplaces more than halve — from 565 to 277 — with its share falling from 18.7 percent to 12.2 percent.

The continued-employment incentive grant is available to employers who extend the retirement age by at least one year, abolish it altogether, or continue to employ or rehire workers who have reached retirement age. Employers receive 900,000 won per quarter for each worker kept on beyond retirement, for up to three years.

Continued employment is also one of the central issues in the government's push to legislate a higher retirement age before the end of the year. Policymakers are weighing both a uniform statutory extension of the retirement age and measures that would effectively lengthen working lives through rehiring and other arrangements after the current retirement age.

Yet the rapid decline in subsidy uptake at the small businesses that most need government support has prompted calls for the system to be overhauled. Analysts and lawmakers argue that if continued employment is to bridge the income gap between retirement and the start of national pension payments, the support framework must be strengthened not just for large companies but for small and micro businesses as well.

"The income gap between retirement and the start of national pension payments can be especially severe for workers at small businesses," Park said. "For continued employment to serve as a genuine means of extending working lives, the system needs to be reformed so that smaller workplaces receive more active, differentiated support."

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