South Korea plans to require all employers to keep funds for workers’ retirement benefits outside their businesses by 2030, seeking to reduce the risk of employees leaving their jobs without being paid.
“We must develop retirement pensions worth more than 500 trillion won ($373.9 billion) into a genuine retirement income security system,” Labor Minister Kim Young-hoon said Thursday.
The government unveiled the proposal after a policy meeting with ruling party lawmakers at the National Assembly. The requirement would take effect in 2028 for workplaces with at least 100 employees, followed by those with 10 to 99 workers in 2029 and smaller workplaces in 2030.
The proposal targets a major source of unpaid employee compensation. Unpaid severance benefits totaled 822.9 billion won in 2025, accounting for 41.1 percent of all wage arrears that year, according to the Labor Ministry.
Requiring employers to accumulate retirement funds at external financial institutions would help protect workers’ benefits from their companies’ financial difficulties.
“Considering the difficulties facing small businesses, we will also provide about 12 billion won in financial support,” Kim said.
The government also plans to expand fund-based retirement pensions, allowing separate trustee entities to manage pension assets with the aim of improving investment performance. Retirement pensions returned 6.47 percent last year, according to the ministry.
Under the proposed framework, employers and employees could agree to establish a separate entity, with representatives from both sides and outside experts participating in its governance.
Trustee entities would require Labor Ministry authorization following a review by a committee including labor and management representatives, financial experts and government officials.
The planned legislation would require trustees to put beneficiaries’ interests first and provide a legal basis for employers and employees to seek compensation for damages. The ministry also pledged close supervision to protect workers’ benefits.
The Korea Enterprises Federation said it hoped the changes would better protect retirement benefits and broaden options for managing the funds.
The business group called for financial support and a phased rollout to ease the burden on smaller employers, alongside safeguards to manage investment risks.
The government aims to prepare legislation in November and secure National Assembly passage before the end of the year.
minsikyoon@heraldcorp.com
