Small business owners push back against mandatory retirement pensions: “More job-splitting part-time jobs will emerge”

[Financial News] The Small Business Owners’ Federation said it opposes the government’s plan to require all workplaces to set aside retirement benefits externally. It said the measure would increase the fixed financial burden on small businesses and could lead to more very short-hours work to avoid that burden, potentially shrinking employment.
 In a commentary issued on the 2nd, the federation called the “Retirement Pension Enhancement Plan” announced by the government on the 29th of last month “a typical case of desk-bound policymaking that ignores realities on the ground” and urged a fundamental review of the policy.
 The core of the government’s plan is to require all workplaces, including those with fewer than 10 employees, to set aside retirement benefits externally by 2030. The measure aims to prevent unpaid benefits by having companies set aside severance pay in advance, as it is a form of “deferred wages.” Last year, severance pay accounted for 41.1% (822.9 billion won) of total wage arrears at companies. 
 The federation said it agreed with the goals of ensuring the stability of retirement pensions and securing workers’ income in old age, but argued that applying the requirement uniformly even to small businesses with fewer than five employees would impose an excessive burden. Unlike the existing severance pay system, retirement pensions require contributions to be paid to financial institutions monthly or quarterly, which the federation said could worsen the finances of small business owners already burdened by rent, utilities and material costs. 
 The federation pointed out that “under the existing severance pay system, payments are made when workers actually retire, leaving room to manage liquidity flexibly, but external funding requires cash to be deposited compulsorily every month or quarter.” It added that this “will intensify the pressure of fixed cash outflows on small business owners who are already struggling to cover even immediate rent, utilities and material costs, becoming the fuse that ultimately pushes them to a breaking point.” 
 It also raised the possibility of employment shrinking and the labor market becoming distorted. The federation said business owners seeking to avoid the burden of setting aside retirement benefits could resort to so-called “job-splitting” part-time work, hiring more workers for fewer than 15 hours a week. It also expressed concern that small businesses with too few dedicated staff could face additional administrative work related to pensions and fees charged by financial institutions. 
 The federation stressed that existing support measures, such as the SME Retirement Pension Fund (Pureun Ssiat), would not be enough to offset the burden of making the requirement universal. It also criticized the plan, saying the Small Business Owners’ Federation was not able to participate in the labor-management-government task force (TF) that discussed it, and that it was difficult to regard a measure developed while key stakeholders were excluded as a social consensus.
 The federation argued that the government should first survey workplace-specific conditions, including length of service and ability to pay, and allow businesses to choose between the existing severance pay system and a retirement pension based on their size and circumstances. It stressed that “the application of retirement pensions to small businesses should be pursued cautiously, based on acceptance on the ground rather than imposed unilaterally.” 
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