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More companies rehire retired employees as contractors as AI changes the workplace

Published: 08 Apr. 2026, 07:00

Office workers walk across Gwanghwamun Square in Jongno District, central Seoul, on May 20, 2025. [YONHAP]

An increasing number of companies are rehiring retired employees as skilled contract workers, reflecting aligned interests between firms seeking immediately deployable talent and workers hoping to maintain their income while easing their workload.

Major conglomerates are leading the way with this employment strategy. LG Electronics and its labor union have agreed to introduce a post-retirement rehiring system starting next year, allowing employees with expertise and experience to continue working for up to one year after reaching retirement age. Companies such as Posco and HD Hyundai Heavy Industries have already implemented similar programs or are accelerating their adoption.

Samsung Electronics also agreed in last year’s wage negotiations to institutionalize postretirement rehiring for employees with three or more children, expanding an existing senior track program previously limited to “Samsung Master” craftsmen, a system that designates top veteran engineers and technicians with over 20 years of experience as elite experts to recognize their skills and retain high-level technical talent.

The proportion of workplaces operating such rehiring systems rose from 27.2 percent in 2021 to 40.6 percent last year, according to the data from the Ministry of Employment and Labor. Among large companies with more than 300 employees, 59.2 percent had adopted the system, compared to 40.4 percent among smaller firms with fewer than 300 employees.

For companies, the system allows them to hire experienced workers at 60 to 80 percent of their previous wages while immediately putting them to work. For employees, it helps bridge the income gap until they begin receiving the national pension and reduces the stress of job hunting.

[MINISTRY OF EMPLOYMENT AND LABOR]

This trend contrasts with the “Assistant Manager Kim dilemma,” in which AI is increasingly replacing the roles of new hires and junior employees, raising barriers to youth employment. The accumulated expertise of senior workers, forged through years of experience, remains difficult to replace with advanced technology.

However, labor groups have criticized the postretirement rehiring system as a “loophole” that companies use to justify wage cuts and job insecurity. Labor groups argue that the system fails to guarantee previous working conditions and effectively converts retirees into one-year contract workers who can be dismissed at any time. Labor advocates are calling for immediate legislation to extend the legal retirement age to 65 from the current 60.

Business groups, on the other hand, warn that simply raising the retirement age without reforming the seniority-based wage system and rigid working-hour policies would significantly increase labor costs. According to a report by the Federation of Korean Industries, employing workers aged 60 to 64 would cost an estimated 30.2 trillion won ($20 billion) annually.

"When a 60-year-old employee retires, companies often gain sufficient financial flexibility to hire two to three new employees," said an HR executive at a major conglomerate.

Job seekers attend a job fair held in Gyeongsan, North Gyeongsang, on March 11. [NEWS1]

There are also concerns that extending the retirement age could worsen youth unemployment. A 2024 report by the Korea Labor Institute found that youth employment fell by 16.6 percent after the legal retirement age of 60 was mandated in 2016.

Experts point to Japan as a reference case. Since revising its law on stabilizing employment for older workers in 2006, Japan has required companies to ensure employment until age 65 but has allowed flexibility in how they do so.

Firms can choose between abolishing retirement, extending the retirement age or rehiring workers on renewable one-year contracts until age 65. Japan’s Ministry of Health, Labour and Welfare reported that 99.9 percent of companies now guarantee employment until age 65, with 67 percent opting to rehire.

Businesses are also paying attention to recent remarks by President Lee Jae Myung on labor flexibility.

"It would be desirable for labor groups to accept greater flexibility in exchange for stronger social safety nets, with companies benefiting from flexibility sharing the associated costs," Lee said at a policy discussion following the launch of the Economic, Social and Labor Council on March 19.

Job seekers attend a job fair in Seoul on Nov. 6, 2025. [YONHAP]

Allowing continued employment until age 65 could increase the country's economic growth by 0.9 to 1.4 percent over the next decade, according to the Bank of Korea.

"Discussions on postretirement employment should be designed to reflect corporate workforce realities and industry-specific characteristics," said Kim Dug-ho, a professor at Sungkyunkwan University’s Graduate School of Governance. "A uniform extension of the retirement age could widen disparities between large and small companies, as well as between regular and nonregular workers."

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 YI WOO-LIM [[email protected]]