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The Korean Chamber of Commerce and Industry (KCCI) announced on Monday, May 16th, 2011 that 59% of salaried Korean workers would be willing to accept a reduced salary for an opportunity to work past their retirement age.  55% of survey participants preferred a 4 to 5 year extension to the retirement age, with 37% willing to take up to a 20% salary cut.  Older participants favored the salary peak system more than younger participants.

A salary peak system essentially allows employees to work past retirement age for a smaller salary than at their “peak” earnings.  The salary peak system was introduced to South Korea in the early 2000s as a way to address the problem of an aging workforce.  The salary peak system allows older workers to maintain employment and creates less of a burden on the government and caregivers.  Since 2000, the aging of Korea’s workforce has accelerated.  The percentage of Korean workers in their 50s has increased from 14% in 2001 to 21% in 2011.  Meanwhile, the percentage of Korean workers in their 20s has dropped from 21% in 2001 to 15% in 2011.  Currently, 11.4% of the Korean population is 65 years of age or older; by 2019, this figure will rise to 15%.

According to the labor ministry, 12% of companies in Korea currently have a salary peak system in place.  GS Caltex Co., the second largest Korean refiner, announced on May 17th that it would be implementing a salary peak system.  The company raised its retirement age from 58 to 60, and the new base pay for workers aged 59 and 60 will be fixed at 80% of their pay at 58 years of age.  As of October 2010, POSCO, Asia’s most profitable steelmaker, extended its retirement age of 56 by two years, with 57-year-old employees receiving 90% of their salary when they were 56 and 58-year-old employees receiving 80% of their salary.  Hyundai Heavy Industries also allows its workers to stay an extra year after the retirement age of 56 at 70% to 90% of their salary.

While the salary peak system aims to boost morale, it can sometimes have detrimental side effects.  Kookmin Bank, the largest Korean bank by asset value, is considering abolition of its salary peak system due to a decline in worker productivity and discomfort between younger and older employees.