Key Takeaways
- • The Korea Federation of Micro Enterprises opposed the government's plan to make external funding of retirement benefits mandatory at all workplaces, calling it an "unbearable burden" for small businesses with limited resources.
- • The government's "Plan to Strengthen the Retirement Pension System," announced October 29, would require all workplaces, including those with fewer than 10 employees, to externally fund retirement benefits by 2030.
- • The federation warned that mandatory monthly or quarterly cash contributions would intensify cash-flow pressure and could push employers toward ultra-short "split-shift part-time jobs" of fewer than 15 hours a week.
- • The federation urged policymakers to survey employees' length of service first, guarantee employers the right to choose based on business size and ability to pay, and fundamentally reconsider the mandate.
Summary
The Korea Federation of Micro Enterprises publicly opposed the government's plan to require all workplaces to externally fund retirement benefits, stating on November 2 that the measure would place "an unbearable burden on small businesses with limited resources," according to the Asia Business Daily.
The "Plan to Strengthen the Retirement Pension System," announced by the government on October 29, would require all workplaces, including those with fewer than 10 employees, to externally fund retirement benefits by 2030. The federation argued that uniformly applying the rule to businesses with fewer than five employees, whose ability to pay has reached its limit, reflects "desk-bound policymaking that ignores realities on the ground."
The federation contrasted external funding with the existing severance pay system, noting that external funding requires mandatory cash contributions every month or quarter. It said this would add pressure from regular cash outflows on small business owners. Because small businesses employ a high share of short-term workers with less than one year of service, the federation argued that monthly contributions made before workers meet eligibility requirements would waste administrative resources and money.
The federation also warned of labor market distortions, including reduced hiring and a rise in "split-shift part-time jobs" of fewer than 15 hours a week, as employers seek to avoid severance-related set-asides. It further cautioned that the paperwork and asset management fees tied to pension plans would constitute a "regulatory bomb" for owners without dedicated administrative staff.
The federation proposed that a survey of employee length of service be conducted first and that employers be guaranteed the right to choose based on business size and ability to pay. It urged that extension of retirement pensions to small businesses proceed cautiously, based on acceptance on the ground rather than unilateral imposition, and concluded that the mandatory retirement pension policy "must be fundamentally reconsidered."
The "Plan to Strengthen the Retirement Pension System," announced by the government on October 29, would require all workplaces, including those with fewer than 10 employees, to externally fund retirement benefits by 2030. The federation argued that uniformly applying the rule to businesses with fewer than five employees, whose ability to pay has reached its limit, reflects "desk-bound policymaking that ignores realities on the ground."
The federation contrasted external funding with the existing severance pay system, noting that external funding requires mandatory cash contributions every month or quarter. It said this would add pressure from regular cash outflows on small business owners. Because small businesses employ a high share of short-term workers with less than one year of service, the federation argued that monthly contributions made before workers meet eligibility requirements would waste administrative resources and money.
The federation also warned of labor market distortions, including reduced hiring and a rise in "split-shift part-time jobs" of fewer than 15 hours a week, as employers seek to avoid severance-related set-asides. It further cautioned that the paperwork and asset management fees tied to pension plans would constitute a "regulatory bomb" for owners without dedicated administrative staff.
The federation proposed that a survey of employee length of service be conducted first and that employers be guaranteed the right to choose based on business size and ability to pay. It urged that extension of retirement pensions to small businesses proceed cautiously, based on acceptance on the ground rather than unilateral imposition, and concluded that the mandatory retirement pension policy "must be fundamentally reconsidered."
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