Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Banks trim retirement packages following growing criticism of hefty incentives
Bankers work at Woori Bank's headquarters in Seoul, in this April 2023 photo. Korea Times photo by Choi Joo-yeon
By Lee Yeon-woo
As voluntary retirement season begins in the banking industry, incentives offered to entice workers to retire early seem less favorable this year despite the sector's robust earnings. This adjustment is a response to public criticism, accusing banks of offering substantial payments to employees while the public faces heightened debt burdens from high interest rates.
According to sources, Sunday, the five major domestic banks — KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup — have all experienced worsened voluntary retirement perks compared to a year earlier.
KB Kookmin Bank, which began accepting voluntary retirement applications last Friday, will offer special severance pay ranging from 18 to 31 months' worth of salary. This is a decrease from the 23 to 35 months offered the previous year.
Hana Bank is targeting employees with at least 15 years of service and who are 40 years or older for voluntary retirement, offering a maximum of 24 to 31 months' salary as a special severance payment. In comparison, last year, the maximum offer was 36 months' worth of salary.
Both Shinhan and Woori Banks have also reduced their special severance payments from the previous year's maximum of 36 months to the current 31 months. NH NongHyup Bank, which previously offered a range of 28 to 39 months worth of salary as special severance payment, has now revised its offer to a range of 20 to 28 months.
This contrasts sharply with the situation in August, when even young bankers in their late 30s chose to leave.
Enticed by the favorable retirement packages, the scale of voluntary retirement in the banking sector has been on the rise. Over the last three years, the total severance pay disbursed by the four major commercial banks has amounted to 1.8 trillion won ($1.3 billion).
The public's critical perception of banks has led to a decrease in the voluntary retirement incentives being offered, despite forecasts of strong performance in the fourth quarter of 2023. President Yoon Suk Yeol even publicly addressed this issue earlier this year, describing it as "pushing the boat out."
In response to public scrutiny, some banks have lowered their wage increase rates and bonus amounts. The overall wage increase rate in the banking sector has been set at 2 percent, a decrease from last year's 3 percent increase.
An industry source said that the banking sector implements the retirement program as a way to focus on "enhancing management efficiency and cutting costs," rather than "favoring their own staff with hefty incentives."