Over 1.48 million SME workers in line for retirement age extension amid generational clash fears

More than 1.48 million full-time workers at small and medium-sized enterprises could be affected by a proposed retirement age extension over the next five years, according to a new analysis, as the National Assembly debates raising the mandatory retirement age from 60 to 65. With workers aged 50 and older already accounting for 44 percent of the SME workforce, experts are calling for intergenerational support measures to prevent the change from squeezing out younger workers.

The Korea SME and Venture Business Policy Association jointly hosted a workforce forum Tuesday at the Korea Federation of SMEs in Yeouido, Seoul, with the federation and the Korea Institute for Small and Medium Enterprises and Entrepreneurship. The forum focused on strategies for promoting intergenerational employment at small businesses in response to the retirement age debate.

The national pension eligibility age is set to rise gradually to 65, and 12 bills calling for extending the mandatory retirement age — currently fixed at 60 — to 65 or older have been introduced in the 22nd National Assembly.

The aging of the SME workforce has accelerated sharply. The share of wage workers aged 50 and older at small and medium-sized enterprises rose 12.4 percentage points over the past decade, from 31.6 percent in 2015 to 44.0 percent in 2025. Since 2021, workers aged 50 and older have outnumbered those aged 39 and under.

Noh Min-seon, a director at the Korea Institute for Small and Medium Enterprises and Entrepreneurship, estimated at the forum that about 1.483 million full-time SME workers would be eligible for a retirement age extension over the next five years.

However, only about 855,000 of those workers are employed at firms that actually operate a formal retirement age system, Noh said. Smaller companies are far less likely to have such a system in place.

The share of workplaces with a formal retirement age system stood at 13.2 percent for firms with one to four employees, 30.5 percent for those with five to nine, and 55.5 percent for those with 10 to 29. The figures suggest the practical impact of any retirement age extension would vary significantly by company size.

The gap in wages and tenure between older workers at large companies and their SME counterparts was also stark. Full-time workers aged 55 to 59 at SMEs earned an average of 3.72 million won ($2,620) per month — 2 million won less than the 5.72 million won earned by their peers at large companies, or about 65 percent of the large-firm level.

Average tenure at SMEs was 12.3 years, more than 10 years shorter than the 23.1 years recorded at large companies. The disparity has fueled calls to distinguish between the seniority-based, long-tenure wage structures common at large firms and the employment realities facing small businesses when designing any retirement age extension policy.

To prevent a retirement age extension from reducing job opportunities for young workers, Noh proposed offering incentives to small and medium-sized enterprises that increase employment of both youth and older workers simultaneously.

Specifically, he suggested providing tax support to SMEs where the number of both young and older workers grows and youth wages also rise, as well as backing intergenerational startups that bring young and older workers together. He also proposed subsidizing labor costs for SMEs that replace foreign workers with older Korean workers.

The SME sector has maintained that a flexible, company-specific approach to continued employment is preferable to a uniform statutory retirement age extension.

Oh Ki-woong, executive vice president of the Korea Federation of SMEs, said small businesses have long faced labor shortages and already voluntarily retain skilled workers beyond retirement age because doing so is essential to their competitiveness. "The autonomous continued-employment practices that are already working on the ground should be respected, and they need to be backed by flexible system design suited to each company's circumstances, along with sufficient fiscal and tax support," he said.

Cho Ju-hyun, president of the Korea Institute for Small and Medium Enterprises and Entrepreneurship, said the central question in the retirement age debate is not how many years to add, but how to design a system that fully accounts for the diverse realities of small businesses — which vary widely in size, sector and workforce composition. "We need an employment structure that preserves the experience of skilled workers while expanding job opportunities and room for growth for young people," he said.

Kang Myung-su, president of the Korea SME and Venture Business Policy Association, said small and venture businesses are grappling with three simultaneous challenges: a rising share of older workers, difficulty recruiting young talent, and the loss of skilled employees. "We need policy discussions aimed at transforming the labor market into one where young and older workers can work and grow together," he said.