Starting next year, the government will pay more incentives to firms introducing a wage peak system in an effort to reduce financial burdens caused by extending the retirement age of their workers under a new law, the labor ministry said Tuesday.

The plan is a key part of a revised enforcement decree to the employment and labor law which was approved by the Cabinet that day, the ministry said. In South Korea, no parliamentary endorsement is required for the revision of an enforcement decree.

Under the new decree, workers who reach the age of 55 or older will receive 8.4 million won ($8,000) a year each from the government for up to five years if they choose to receive less salary than before in return for setting their retirement age at 60 or older.

For this, their wages should be cut by 10 percent or more in the first year of applying for the wage peak system, 15 percent or more in the second year and 20 percent or more in the third.

Employees will get up to 7.2 million won a year for five years if their retirement age is set between 55 and 59, according to the ministry.

Currently, the government provides up to 6 million won for up to 10 years for those who choose to make 20 percent less in wages from the point when they reach the age of 50 or above in exchange for extending their retirement age to 56 or above.

“We loosened requirements for receiving government subsidies and increased the amount of financial support in order to encourage firms to introduce the extended legal retirement age together with the wage peak system as early as possible,” the ministry said in a release.

n April, the National Assembly passed a bill that would make it mandatory for the public sector and big businesses with 300 or more employees to extend the retirement age to 60 or above from 2016 and other firms from 2017.

Current law recommends a retirement age of 60, but it is not mandatory. All government offices and most private-sector businesses require their workers to retire between the ages of 56 and 58. (Yonhap News)