Seoul pilots performance based rehiring to keep retirees working

Why Seoul wants to change retirement without changing the age

Seoul is preparing to test a continued employment system that would rehire retirees on flexible, performance based contracts instead of pushing for a blanket increase in the legal retirement age. The idea aims to bridge a long and costly gap in South Korea’s labor market. On average, Koreans leave their main career roles at around age 49, yet many want to keep working until roughly 69. That 20 year difference has become a missing middle in the workforce, draining income from households and experience from employers at a time when the capital city is aging quickly.

Government figures show more than 10 million people between 55 and 79 are working or seeking work, close to 60 percent of that age group and the highest level since record keeping began in 2005. The question for Seoul is how to keep more of these experienced workers in good jobs with fair pay, while also creating space for younger employees. The continued employment plan attempts to answer that challenge by changing how older workers are rehired and paid, not simply how long they can legally stay on the payroll.

What Seoul is proposing

The blueprint, developed by the city funded Seoul Institute, would allow retirees to return in part time or project roles where pay is tied to performance and the value of the job rather than seniority. It is a shift away from the traditional pay ladder that rewards years served and toward models that match tasks, output, and market value. Researchers describe the approach as structured reemployment, with shorter, renewable contracts designed to keep experience in the system and give workers more control over hours and duties.

Pilots are scheduled to start in the city’s public sector next year. Municipal agencies, information technology, research institutes, and older adult care services are first in line. The city will study how reduced hours, performance based pay, and clearer job design affect productivity, morale, and service quality. If the pilots work, Seoul plans to extend the model to all city run institutions by 2028 and invite private employers across the capital to join after 2029. Incentives for participating companies would mix wage subsidies, tax benefits, and management consulting support to help redesign roles and evaluation systems.

In March, Seoul Mayor Oh Se hoon said the city would weigh a formal introduction of continued employment and cast the idea in growth terms for an aging economy.

Mayor Oh Se hoon said the approach could become a new growth engine for Korea’s aging economy.

The city’s framing is that better designed second careers can preserve know how, ease labor shortages in care and service fields, and give older residents both income and purpose. It is not a simple cost cutting exercise. The pilots will track whether job value pay actually matches responsibilities and output, and whether redesigning roles lifts quality without overburdening older staff.

Why not raise the retirement age to 65

Nationally, lawmakers have debated lifting the statutory retirement age from 60 to 65, with proposals to reach 65 by 2033. Seoul’s plan takes a different route. A single age limit treats diverse industries and individuals the same, whether a worker is in a physically demanding job or a desk role, whether a firm is a small contractor or a large research lab. The Seoul Institute argues that structured reemployment would be more flexible and fair, and that attention should shift to the quality of post retirement jobs and the pay rules that govern them.

Legal experts warn that raising the age without other reform could prolong pay cuts and disputes under existing systems, a reminder that age reform and wage reform are connected.

Kim Ki duk, a labor lawyer in Seoul, said: “Simply raising the retirement age to 65 would give companies more years to apply discriminatory wage cuts under the current system.”

This criticism targets the peak wage practice that reduces salaries for older employees in the years before mandatory retirement. Without changes to how wages and evaluations work, a higher retirement age could stretch a difficult period rather than improve it.

How the continued employment system would work day to day

City officials and researchers expect most rehired retirees to take on roles that rely on experience, judgment, and consistency. Many would work fewer hours or on defined projects. Employers could use limited duration contracts that are renewable, based on mutually agreed goals and reviews that focus on work quality and outcomes rather than tenure. The model also seeks to support gradual transitions, so a full time manager at 60 might shift to a three day mentoring role, or an engineer might move into quality assurance for specific product lines.

Roles for experienced staff

Examples include mentoring and training, quality control, safety oversight, client liaison, documentation and standards, project scoping, and process improvement. In care services, retirees could coordinate schedules, supervise teams, and handle family communication. In research units, senior staff could support grant reviews, compliance, and experimental protocols while younger researchers lead fieldwork. These functions preserve institutional memory and reduce costly errors.

Pay and evaluation

Pay would be aligned with job value and measurable performance. That requires clear role descriptions, transparent criteria, and regular feedback. The city plans to assist employers with job analysis and evaluation tools so that responsibilities match pay bands. Seniority based increments would be phased out in favor of target based reviews. For workers this may feel unfamiliar at first, which is why the pilots include management consulting and training to build trust in the process.

Lessons from Japan

Japan offers the closest reference point. Companies there often allow employees to keep working after a company retirement age until they reach pension eligibility, frequently on contract or part time terms. Many older staff move into mentoring, quality assurance, or support functions that fit their experience and physical capacity. Japanese firms report that clarity on role scope and consistent evaluation are essential, because confusion can lead to frustration about pay and status.

There are caveats. If continued employment only means a steep pay cut with a new title, morale suffers and productivity gains fade. Seoul’s plan tries to avoid that trap with job value based pay and better designed roles. Ensuring that goals are realistic and that older employees have a say in schedules and tasks will matter as much as the contract terms. Seoul is also signaling that it wants to avoid crowding out promotion tracks for younger staff by shifting retirees into support and advisory positions that open space for new leaders.

The social stakes: peak wage, elderly poverty, and dignity at work

South Korea has one of the highest elderly poverty rates in the developed world. Human Rights Watch has documented how mandatory retirement and the peak wage model push many older workers out of their main jobs and into lower paid, less secure roles. Data collected by the government show workers aged 60 and over earn close to 30 percent less on average than those under 60, and many find themselves in insecure positions such as security guards or care aides with limited protections. Wage reductions that can reach half of prior pay in the years before retirement weaken household finances and lower pension contributions.

Critics argue that these systems treat age rather than ability as the decisive factor. New approaches that focus on job content and performance seek to break that link. Seoul’s pilots cannot rewrite national law, but they can test pay and evaluation structures that reduce age bias and strengthen fairness inside organizations.

Bridget Sleap, a researcher with Human Rights Watch, has emphasized the harm from policies designed around age rather than work.

Bridget Sleap said: “They deny older workers the opportunity to continue working in their main jobs, pay them less, and push them into lower paid, precarious work, all just because of their age.”

Human stories cut through the debate. In testimony collected by rights researchers, a 52 year old attorney in Seoul described the experience of being sidelined after years of service.

Gwon Oh Hoon said: “It is an infringement of human dignity. Just because I am older, I cannot work where I have worked my entire life.”

Seoul’s concept will only succeed if it delivers stable, meaningful roles with clear expectations and fair pay. If it becomes a rebranding of lower quality work, it will be judged harshly by the people it is meant to help.

Can performance based pay avoid age discrimination

Careful design is the difference between a fair second career and a system that recycles bias. South Korea’s law against age discrimination still allows employers to set a mandatory retirement age at 60 or older. That legal backdrop matters. Moving older workers to new contracts could trigger disputes if criteria are vague or if older staff are steered into inferior roles without choice. To reduce risk, employers will need clear job descriptions, transparent scoring systems, documented reviews, and a straightforward appeal path.

Guardrails employers will need

There are practical tools for this. The Later Life Workplace Index, adapted in South Korea and several other countries, gives organizations a way to assess leadership practices, work design, health management, knowledge transfer, and transition to retirement. Employers can use such frameworks to set measurable goals, track outcomes by age group, and identify where bias creeps in. Training managers to spot age stereotypes, setting mixed age teams, and giving older staff access to development and certification help keep evaluations focused on work, not age.

• Define roles and outputs before negotiating pay
• Use objective metrics where possible, such as error rates, client satisfaction, and project delivery
• Offer choice on schedules and duties to match health and skills
• Create internal coaching tracks so knowledge is captured and rewarded
• Allow reviews and appeals to correct mistakes quickly

Demographics, pensions, and the economic case

Seoul’s working age population peaked in 2009 and is projected to fall by about 43 percent by 2052, a sharper decline than the national average. By mid century, nearly two thirds of the city’s residents aged 65 and older are expected to be 75 or older, and almost one in four will be over 85. Care and service jobs already report shortages, and older workers make up a growing share of those sectors. Keeping experienced staff engaged, even at reduced hours, can help stabilize services that families rely on.

At the same time, the national pension system faces funding pressure. The government has proposed raising combined pension contributions from 9 percent of income to 13 percent, with measures to improve long term returns and coverage. The national pension fund is large but could be depleted in the 2050s without changes. Policymakers have also discussed aligning the retirement age with pension eligibility as it rises to 65 by 2033. Continued employment can support these goals by smoothing income for older households and reducing the years when people have little work and limited pension access.

For employers, a more predictable supply of experienced labor can reduce hiring and training costs and protect quality. In research and engineering, where tacit knowledge and networks matter, keeping senior experts involved preserves hard won capabilities. Analysts have called for wider compensation reform to retain high skill talent, including better incentives and clearer career paths that extend beyond retirement. The city’s model supplies a tool to do this without closing doors to younger hires.

What companies gain and what they fear

Companies often worry that retaining older employees will raise costs and block promotion. The continued employment model addresses those fears by reassigning veterans to roles that amplify teams without taking the next management slot. Pay aligns with the work performed, not tenure. The city’s incentives and consulting support can offset the transition cost of job analysis, evaluation redesign, and manager training.

Small and midsize firms may still find the administrative burden heavy. That is why the pilots include management support and why the city plans to publish templates for contracts, evaluations, and job descriptions. If the early programs show productivity gains, lower error rates, and higher client satisfaction, the business case will be easier to make. If they do not, the city will face pressure to rethink the model before expansion in 2028 and 2029.

Timeline, metrics, and what to watch

Seoul plans to start pilots in the public sector next year, review results, and scale to all city institutions by 2028. Private employers would be invited to join from 2029 with incentive packages. At the same time, the National Assembly will continue to debate a retirement age increase and pension reforms. The city’s results could influence that national discussion by providing evidence on productivity, fairness, and worker satisfaction.

Key measures to watch include the number of retirees rehired, changes in productivity and quality, retention of younger staff as older workers shift to advisory roles, reported satisfaction from both groups, and the frequency of disputes. Data should also track whether rehired roles are genuinely part time or project based, whether pay matches job descriptions, and whether older workers gain access to training and development. Transparent reporting will be critical if the city wants to win the confidence of workers, unions, and employers.

What to Know

• Seoul will pilot a continued employment system that rehired retirees on flexible, performance based contracts instead of raising the retirement age
• Pilots begin in the public sector next year, with expansion to all city institutions by 2028 and private employers after 2029
• Roles will focus on mentoring, quality control, advisory work, and other functions that rely on experience, often with fewer hours
• Pay will be tied to job value and performance, replacing seniority based increments for these second career roles
• The city will offer wage subsidies, tax benefits, and management consulting to help employers redesign jobs and evaluation systems
• South Korea’s peak wage practice and mandatory retirement have contributed to high elderly poverty and lower pay for workers over 60
• Experts caution that raising the retirement age without wage reform could extend periods of discriminatory pay cuts
• Japan’s experience shows continued employment can work if job scope and evaluation are clear and fair
• Demographics and pension pressures make retaining experienced workers a priority for Seoul’s economy
• Success will be judged on productivity, fairness, worker satisfaction, and whether rehiring protects pathways for younger staff