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Voluntary resignations favored over layoffs for corporate restructuring

Published: 07 Nov. 2025, 14:46 Updated: 07 Nov. 2025, 15:42

A tired office worker. Image is unrelated to the story. [GETTY IMAGES BANK]

Voluntary resignations are increasingly replacing layoffs as the standard method of work force restructuring at large companies.

Amid sluggish domestic demand and worsening business conditions, companies are choosing to induce voluntary departures instead of implementing layoffs, which entail significant legal and social risks. However, these programs often fall short of expectations in participation, limiting their effectiveness in reducing headcount.

None of Korea’s major conglomerates implemented forced layoffs this year, despite difficult business environments across sectors, according to industry sources on Thursday.

Major players such as LG Chem in petrochemicals, Hyundai Steel in steel, LG Electronics in home appliances, SK Telecom and LG U+ in telecommunications, and Hyundai Duty Free and 11Street in retail conducted restructuring through voluntary retirement programs under the pretense of business reorganization or profitability-focused rebalancing.

Several companies, such as 7-Eleven, LG Display and LG HelloVision, offered such programs for the second year in a row. Banks have also institutionalized voluntary retirement programs, targeting around 2,000 employees annually to cut labor costs and streamline operations.

“Even with low application rates, companies feel they have no choice but to maintain the appearance of voluntary resignations,” said one industry official.

Legal hurdles make layoffs nearly impossible, as companies must prove “urgent managerial necessity” under the Labor Standards Act and show evidence of efforts to avoid layoffs, such as wage freezes and the elimination of overtime.

Employers are also required to first attempt voluntary resignations, select layoff targets based on objective criteria, and notify and consult with unions or employee representatives at least 50 days in advance.

Companies are still haunted by past mass layoff controversies. In 2009, SsangYong Motor's large-scale downsizing — 1,666 voluntary resignations and 980 forced layoffs — escalated into a prolonged strike and lawsuits over damages. Such precedents have made companies extremely wary of layoffs.

In particular, when only a specific business unit — not the entire company — is operating in the red, it becomes difficult to prove that layoff targets were selected fairly, even if the court acknowledges that there is an urgent managerial necessity.

Kim Deuk-jung, head of Ssangyong Motor's chapter of the Korean Metal Workers' Union, speaks during a press conference in front of the Supreme Court in Seocho District, southern Seoul, on June 15, 2023. [NEWS1]

Consequently, severance packages for voluntary resignations have become far more generous than in the past. On average, compensation is equivalent to three years of salary, with some companies offering up to 400 million to 500 million won ($275,000 to $340,000) in severance plus tuition support for children. Yet participation remains limited, as poor job market conditions make reemployment difficult even with large payouts.

Hyundai Steel’s Pohang plant offered severance equivalent to up to three years of salary and educational support to 1,200 technical staff — but only about 10 employees applied. KT, however, saw about 2,800 employees take the offer, which included packages worth up to 430 million won. Some observers cited pressure stemming from KT’s spinoff plans as a driving factor behind the higher participation.

“Even with generous packages, it’s hard to survive outside the company in a downturn,” said an source at a manufacturing conglomerate.

“Only junior employees with reemployment potential or those with succession plans for family businesses tend to leave.” Another noted, “Ironically, it's often the high-performing young talent who opt to leave, while the high-salary, low-productivity employees who should be the targets of restructuring stay put. But layoffs are simply not an option.”

“The legal requirements for layoffs are so strict that large corporations can’t easily resort to them,” Cho Sang-wook, a labor attorney at law firm Yulchon, said. “Voluntary resignations with compensation remain the legally safer alternative.”

“Rather than repeatedly using work force restructuring to cut costs, companies should establish a virtuous cycle by hiring new employees alongside voluntary retirements,” labor consultant Kim Jae-min added.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SU-MIN [[email protected]]