KEF: "Phased Reemployment Rather Than Uniformly Raising Retirement Age" ... Seeks Solutions in Japan's Example

Japan expands employment through age 65 while keeping the statutory retirement age at 60
Uses rehiring and job-based differentiated pay

The Korea Enterprises Federation (KEF) argued that, rather than uniformly raising the statutory retirement age, companies should redesign the jobs and roles of workers after retirement and expand employment gradually, taking youth employment and the burden on businesses into account.

In a report released on October 11 titled “Japan’s Retirement Age Extension Cases and Their Implications,” the KEF outlined how Japan has maintained its statutory retirement age at 60 while ensuring employment opportunities through age 65 by, among other measures, rehiring older workers. In March 2026, the KEF visited Japan’s Ministry of Health, Labour and Welfare, the Japan Business Federation (Keidanren), the Japan Institute for Labour Policy and Training (JILPT), and local companies to examine the background behind the introduction of related systems and how they are being implemented.

According to the report, Japan first made it an obligation for employers to make efforts to secure employment opportunities through age 65 in 2000, then promoted the introduction of a system through a legal amendment in 2004. Companies were allowed to choose one of three options: raising the retirement age, introducing a continued-employment system, or abolishing the retirement age. From 2006, the age at which employment-security measures became mandatory was raised in stages, and in 2013, companies were required to employ all workers who wished to continue working through age 65. Following a transitional period, the requirement took full effect in 2025.

Japan gave companies the freedom to choose how to expand the system and allowed them a grace period because of the difficult employment conditions facing young people at the time. As employment prospects for young people deteriorated during the “employment ice age,” which lasted from the mid-1990s to the early 2000s following the collapse of the bubble economy, the burden on companies of pursuing both increased employment of older workers and new hiring became a point of contention. In response, Japan left companies room to manage their workforces, including by allowing labor and management to consult on criteria for selecting workers to be rehired.

The burden of employing older workers was shared among labor, management, and the government. Workers accepted wages lower than those they had received just before retirement, while companies adjusted job and pay structures alongside rehiring. The government provided partial compensation for the reduction in rehired workers’ wages through the “Continued Employment Benefits for the Elderly.” In 2010, rehired workers in Japan earned an average of 68.4% of their wages just before retirement.

Japanese companies changed job and compensation systems to continue using older workers after retirement. Company A, featured in the report, reduced the share of seniority-based pay and increased pay differentiation based on job duties and performance. It used the resources secured through these changes to improve the treatment of rehired workers and provide compensation based on expertise and performance. The company also revamped its job-grade system so that workers could use their expertise, moving beyond roles centered on assisting with existing work and training successors.

Company B held several interviews with workers approaching retirement, comprehensively assessed their health, expertise, and the organization’s staffing needs, and then determined their reemployment duties and adjusted their terms of employment. Rather than assigning everyone the same work after retirement, the company reflected each individual’s capabilities and the company’s needs.

Based on these cases, the KEF stressed that discussions in South Korea about extending the retirement age should also take youth employment, companies’ labor costs, and the feasibility of reforming pay systems into account. It said that raising only the statutory retirement age while maintaining seniority-based pay and rigid employment systems could reduce companies’ capacity to hire new workers.

Lee Sangcheol, head of the KEF’s Employment and Social Policy Division, said, “If the retirement age is extended uniformly, the burden could lead to a contraction in youth employment and a worsening of the dual structure of the labor market.” He added, “We need to move beyond discussions about uniformly extending the statutory retirement age and design a flexible system centered on reemployment that reduces conflicts with youth employment and guarantees companies the freedom to make their own choices.”

This content was produced with the assistance of AI translation services.