Government seeks to mandate external retirement fund reserves at all workplaces by 2030
Federation warns of higher fixed costs, rise in ultra-short-term jobs
Group calls for voluntary choice based on workplace size
The Korea Federation of Micro Enterprises said Monday it opposes the government's plan to require all workplaces to set aside retirement benefits in external funds.
The federation issued a statement that day calling the plan to force businesses with fewer than five employees to join the retirement pension system "desk-bound policymaking that ignores ground-level realities," and called for a review of the policy.
The government's "Retirement Pension Enhancement Plan," announced Thursday, would phase in mandatory external reserves for retirement benefits based on workplace size — starting with businesses of 100 or more employees in 2028, expanding to those with 10 to 99 employees in 2029, and covering workplaces with fewer than 10 employees by 2030. A related bill is being pushed for passage in the National Assembly before the end of the year.
The federation said the requirement to make monthly or quarterly contributions — unlike the existing lump-sum severance system — could strain cash flow for small business owners. It argued that workplaces with a high proportion of workers employed for less than a year would face contribution burdens even before it is clear whether those employees will be entitled to retirement benefits.
The group also raised concerns about a potential chilling effect on hiring, warning that business owners may increase the number of workers on contracts of fewer than 15 hours per week to reduce contribution costs. Administrative burdens from managing pension accounts and asset management fees were also cited as added pressures.
The government maintains that mandatory external reserves are necessary to prevent unpaid retirement benefits. Last year, retirement pay accounted for 41.1 percent of total unpaid wages — 822.9 billion won ($615 million). The government is also pursuing fiscal support and loan programs to encourage small and medium-sized enterprises to adopt the system early.
The federation said a survey of employee tenure by workplace should come first. It called for allowing businesses to choose between the existing severance system and the retirement pension regime based on their size and ability to pay.
"Applying the retirement pension system to small businesses must be pursued carefully, based on how receptive workplaces actually are — not through unilateral mandates," the federation said.
hong@heraldcorp.com
