Alphabiz - Lotte Engineering & Construction Launches Voluntary Retirement Program Amid Rising Cost Pressures

Lotte World Tower skyline. (Photo = Lotte Corporation

[Alpha Biz= Kim Jisun] Lotte Engineering & Construction has initiated a voluntary retirement program targeting long-tenured employees and those subject to peak wage schemes, as part of a broader organizational restructuring.

According to industry sources on April 13, the company announced the plan via its internal bulletin board. Eligible employees include long-serving staff and those under wage-peak systems. Applicants will receive severance packages of up to 30 months’ base salary depending on years of service, along with an additional KRW 30 million in special compensation. The company will also provide up to KRW 10 million per child in tuition support for employees with children enrolled in university or below, as well as outplacement services such as career transition consulting.

The company stressed that the move is not merely a downsizing effort but part of a broader initiative to improve organizational efficiency. A company official said the program is intended to strengthen competitiveness through workforce circulation and to proactively transition into a younger and more efficient organization. In parallel, the company plans to continue hiring both new and experienced employees, following the recruitment of 39 new hires in the first quarter, with additional hiring planned in the coming quarters.

However, industry observers view the move as effectively signaling tighter management amid a prolonged downturn in the construction sector. Profitability pressures have intensified due to worsening market conditions, compounded by geopolitical risks in the Middle East. In particular, instability following recent tensions involving the United States, Israel, and Iran has increased volatility in oil and raw material prices, directly driving up construction costs.

Construction costs are already nearing record highs. According to the Korea Institute of Civil Engineering and Building Technology, the construction cost index has risen for six consecutive months, reaching an all-time high of 133.69 in February. Further increases are expected as rising oil prices and material costs since March are reflected in project expenses.

These changing conditions are also influencing the business strategies of individual construction firms. In several redevelopment and reconstruction projects, contractors have begun requesting cost increases from project owners. Hyundai Engineering & Construction is reportedly seeking higher construction costs in projects such as redevelopment in Seoul’s Eunpyeong District, Songpa District, and reconstruction in Gangseo District, reflecting the growing burden of input costs.

Workforce restructuring is spreading across the industry. Hyundai Engineering previously implemented a voluntary retirement program under the “Career Rebuilding Program” in December last year, while DL E&C reduced its workforce by more than 14%, primarily among contract workers, in response to a decline in project starts.

As market conditions weaken and profitability deteriorates, construction companies are increasingly moving to reduce fixed costs through restructuring initiatives.

Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)