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Banks speeding up manpower reduction with voluntary retirement packages

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A bank clerk works at a sales office of Hana Bank in Seoul on Nov. 30. Yonhap
A bank clerk works at a sales office of Hana Bank in Seoul on Nov. 30. Yonhap

By Lee Min-hyung

Banks are hastening their workforce cuts, offering early retirement packages to employees amid diminishing demand for traditional bank clerks.

As the year-end reshuffle season approaches, commercial lenders are opening up early retirement programs to induce eligible staff to apply, in a move to cut fixed costs and boost their online transformation.

Not all lenders have given official numbers of staff who have applied for the voluntary retirement programs, but it is expected that the number of workers who take it up this year will exceed last year's total.

This is because banks do not want more employees handling conventional banking tasks amid the rise of digital banking and they are on track to slash the number of sales offices.

NongHyup Bank said it stopped receiving voluntary resignations at the end of last month for those aged 56 and those over 40 who have worked for more than a decade.

It said it expanded incentives this year to attract more workers. Last year, 370 officials applied for early retirement.

NongHyup offers a special severance pay package equal to 28 months of the worker's average monthly salary for 56-year-old employees. Those born in 1965 and 1966 will be able to receive 35 months and 37 months, respectively, of their average monthly salary through the program.

Employees born between 1967 and 1970 can receive 39 months of their average salary, with those born between 1971 and 1980 entitled to 20 months.

Last year, the lender offered 28 months of salary as special severance pay for those aged 56. It also provided employees aged between 40 and 55 with 20 months of their monthly salary.

Other major lenders ― such as KB, Shinhan, Hana and Woori ― will also soon put up notices for voluntary retirement after ending negotiations with labor.

"No specific plans for the voluntary retirement program has been fixed as of now," an official from Shinhan, one of the biggest lenders here, said.

At the end of last year, Shinhan also offered special severance pay of a maximum of 36 months of an applicant's salary, depending on how long they worked for the bank.

Industry officials, however, said major lenders will likely offer more enticing incentives this year to boost their digital banking strategy.

"Nothing has been confirmed as to how many employees they are going to hire next year, but the total number in their workforce will continue to decline in line with the rise of digital banking," a source from a lender said.

"Banks are already closing down their sales offices and recruiting officials with expertise in emerging technologies ― such as artificial intelligence (AI) or blockchain.

"Such officials are likely to build a future roadmap for the lenders' digital innovation. When digital banking takes concrete shape, such technologies will be able to replace the workload done by conventional bank clerks."

On top of that, most lenders' interest margins are on the decline amid prolonged low interest rates.

According to data from the Financial Supervisory Service, Korean banks' net interest margin hit a record low of 1.4 percent in the third quarter. The figure is a key barometer indicating banks' profitability.

"Under the widening uncertainties surrounding the coronavirus spread and falling interest margin, banks will be less motivated to hire new employees, and cut the number in their workforce," another official from the banking industry said.

Lee Min-hyung mhlee@koreatimes.co.kr


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