Voluntary retirement in Korea: forced resignations count as dismissal

This guide is for employers, HR staff and employees in Korea who face a voluntary retirement program (희망퇴직, huimang toejik). Since 2024 several large Korean companies have run such programs, some of them aimed at staff aged 50 and over. Legally, voluntary retirement is a mutual agreement to end employment. If the company pushes people to resign against their will, courts treat it as dismissal.

Recent cases

LG Electronics is a clear example. In August 2025 it took applications in its TV business division (Media Entertainment Solution) from employees aged 50 and over or with low performance over the past 3 years. In September 2025 it extended the program to all divisions, for staff aged 50 and over at department-head level or below and for low performers. Reported terms were up to 3 years' salary on top of statutory severance, depending on length of service and the years left until retirement age, plus up to 2 years of children's school fees. The company said the aim was to renew its workforce rather than to cut costs, and that it had also run such programs in 2022 and 2023, when results were good.

Other industries have done the same:

Why companies do it

Two forces stand out. The first is an ageing workforce. At LG Electronics, staff aged 50 and over rose 23.7% in two years to 11,993 people, 16.3% of all employees, while staff in their 30s and 40s fell 2.5% (Kuki News, August 18, 2025). Under seniority-based pay (연공서열, yeongong seoyeol), wages rise with years of service, so an older workforce costs more. Promotion bottlenecks can also lower younger employees' motivation.

The second is weaker results. In the second quarter of 2025, LG Electronics' operating profit fell 46.6% from a year earlier to ₩639.4 billion, and its TV division posted an operating loss of ₩191.7 billion. The company cited weak demand in major markets, US tariffs, tougher competition and higher logistics costs. Companies usually cut other costs first. In April 2026, for example, LG Electronics told executives to fly economy class on overseas business trips from the second quarter and to cut the expenses of executives and other unit heads to about half (Newsis, April 10, 2026). When such savings are not enough, fixed labor costs come under review.

The legal line: agreement, not pressure

Voluntary retirement is legally different from dismissal for business reasons (정리해고, jeongni haego). Such layoffs must meet Article 24 of the Labor Standards Act (근로기준법): an urgent business need, efforts to avoid dismissals, fair selection criteria and notice to the worker representative 50 days in advance. See Layoffs for business reasons in Korea run on two deadlines: 50 and 30 days. In voluntary retirement, a worker applies, the company accepts, and the contract ends by mutual agreement.

The Supreme Court has drawn the line. If an employer makes a worker who has no intention to resign write and submit a resignation letter, and then accepts it, the termination is in substance the employer's one-sided decision and counts as dismissal (Supreme Court Decision 2016Da255910, February 3, 2017). The court weighs how the letter came to be submitted, the method, strength and frequency of the pressure, the disadvantage expected from refusing, whether money was offered, and the worker's conduct before and after.

At workplaces with 5 or more regular employees, a worker who believes a dismissal was unfair can apply to the Labor Relations Commission (노동위원회) for a remedy within 3 months (Article 28).

Choosing who is offered the program

Selection criteria should be reasonable and objective. The Age Discrimination Act (고용상 연령차별금지 및 고령자고용촉진에 관한 법률) bans discrimination by age without a reasonable reason in retirement and dismissal (Article 4-4). Applying a criterion other than age that hits one age group especially hard, without a reasonable reason, also counts as age discrimination. Combining factors such as performance results and job fit is safer than using age alone. Do not force anyone to apply, and do not penalize those who decline.

Packages, benefits and support

• Statutory severance: at least 30 days' average wage for each year of service, paid within 14 days of leaving (Employee Retirement Benefit Security Act, Articles 8 and 9).
• Extra payment: each company sets its own amount. Recent packages were based on years of service and the time left until retirement age.
• Unemployment benefits: leaving after the employer recommends resignation, or through a call for voluntary retirees under an employment adjustment plan when staff cuts are unavoidable because of worsening business, a personnel backlog, restructuring or similar reasons, is a justified reason that does not block job-seeking benefits (Enforcement Rule of the Employment Insurance Act, Appendix 2, item 5). Other conditions still apply. For people who left on or after January 1, 2026, the daily benefit is capped at ₩68,100. See Separation certificates are due within 10 days of an employee's request.
• Re-employment support: an employer whose insured workforce averaged 1,000 or more in the previous year must offer re-employment services, such as career assessment, job placement or training, to workers leaving for involuntary reasons in or after the year they turn 50. The worker must have been insured for at least 1 year (3 years for fixed-term workers). The rules are in Article 21-3 of the Age Discrimination Act and Articles 14-2~14-4 of its Enforcement Decree. E-mart's 2024 package, for example, included job transition support and re-employment consulting.

After the program

Look after the people who stay. Large cuts raise anxiety and lower morale, so explain the company's direction and offer promotion chances, performance rewards and training.

Plan for the long term. Analyze staff by age, grade and job, and forecast the structure 5~10 years ahead. Korean law requires a retirement age of at least 60 (Article 19 of the Age Discrimination Act). A step-by-step rise to 65 was debated in the National Assembly in 2026 but had not been enacted as of October 23, 2026. If you consider a wage peak system (임금피크제), which cuts pay from a set age, note that the Supreme Court has held such cuts void where there was no reasonable reason (Decision 2017Da292343, May 26, 2022). Fixed-term contracts are generally limited to 2 years in total, with exceptions such as workers aged 55 or over and holders of certain professional qualifications (Article 4 of the Fixed-term and Part-time Workers Act). Keep investing in new skills, such as AI and data, through both hiring and retraining.