The government plans to expand cash incentives for companies that extend their retirement age as part of measures to cope with the looming mass retirement of baby boomers, and more broadly, the rapidly aging workforce, officials said Tuesday.

The Ministry of Employment and Labor unveiled its five-year master plan, which includes more incentives to encourage employers to adopt a peak salary system, defer the retirement age and hire more senior workers. The 2012-2016 plan, which was approved by the Cabinet on Tuesday, is the second blueprint that the ministry has devised to deal with the demographic challenge.

“The new plan is focused on helping senior workers start a second life (after retirement) without much difficulty,” Labor Minister Lee Chae-pil said. “By 2020, we should be more prepared for the era of a 100-year life expectancy.”

Currently, average Korean workers retire from their main job before they reach 55. The ministry’s goal is to encourage employers to delay it to around 60 through incentive programs.

Above all, the ministry plans to expand incentives for the peak wage system, in which employers raise the retirement age for senior employees in return for gradually reducing their salaries in the years leading up to retirement. Currently, those who agree to cut their salaries by 20 percent are eligible for a state subsidy amounting to 6 million won a year.

From next year, the bar will be lowered to a 10 percent reduction, the labor ministry said.

Also, companies will be given cash incentives for 2 years if they delay retirement by 3 years ― about 300,000 won a month per each worker whose retirement is extended.

The government plans to train a total of 1,600 senior workers to be “field professors,” so that they can passon their accumulated know-how to younger generations.

The five-year plan also includes some measures on job sharing between young and old workers. Companies will be given incentives if they reduce the working hours of senior workers and hire young workers instead.

According to the ministry data, about 7.12 million baby boomers, or 14 percent of the nation’s population, will reach retirement age by 2015.

By Lee Sun-young (milaya@heraldcorp.com)