New law to regulate interim settlement of severance pay

SEOUL, July 25 (Yonhap) -- Starting in July next year, domestic employees will be barred from asking for an interim settlement of severance pay under legal revision aimed at reinforcing post-retirement welfare for the aging population, officials said Monday.
The labor ministry said on Monday it promulgated a revised severance package law to limit an early depletion of employees' retirement allowances as part of efforts to financially bolster post-retirement life.
The new law, which will take effect on July 26, 2012, effectively bans companies from paying part of severance packages in advance to employees unless they have urgent financial needs like house purchases or hospital treatment, according to the Ministry of Employment and Labor.
The revision comes as some former employees lead financially troubled retired lives after withdrawing part of their severance benefits before their retirement due mostly to temporary money needs.
The introduction of the new regulation is expected to prop up the financial security of the country's fast-growing retired population, the ministry said.
The revised law also requires small to mid-size employers and private business owners to adopt pension packages to guarantee comfortable post-retirement lives for their employees, it added.
"The retirement pension system is a critical means to guarantee old-age income in an aging society," a ministry official said. "Through on-site instructions, we will try to make the new law take root."
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