"Hastily Announced 'Introduction of Job-Based Pay System'... What About Labor-Management Agreement?"

Public Institutions Deciding to Introduce Job-Based Pay System Reflecting Management Evaluation
Looking Closer... "Labor-Management Agreement Needed for System Operation"

[Asia Economy Reporter Kim Bo-kyung] After the government decided to reflect the introduction of the job-based pay system in this year's public institution management evaluation, some institutions announced plans to restructure their wage systems centered on the job-based pay system. However, upon closer inspection, it was difficult to find places where labor-management agreements had been reached for the practical operation of the system. Furthermore, the direction was diverging from the original purpose of the job-based pay system, which is to reduce labor costs and increase work productivity.

Korea Hydro & Nuclear Power (KHNP) reached a broad agreement between labor and management last December to restructure the wage system centered on job-based pay, but there is still a long way to go. This is because the job-based pay system was applied only from last month to employees at grade 3 (assistant manager level) and above, who are automatically excluded from union membership. Grade 3 and above account for about 25% (3,000 people) of the total 12,000 employees. A KHNP official said, "Since they are not union members, there was no question of agreeing or disagreeing with the introduction of the job-based pay system," adding, "The wage gap by job is not at a level that causes relative deprivation, so dissatisfaction is not significant." KHNP has commissioned a professional consulting firm to analyze and specify criteria by job grade. To apply the job-based pay system to general employees at grade 4 and below who are union members, separate negotiations between labor and management are required. In other words, to fully implement the job-based pay system, the major obstacle of labor-management agreement must be overcome.

Korea East-West Power also decided to introduce a 'job-based pay supplement system' last December, but it is uncertain when the system will actually be implemented. A representative from East-West Power said, "The job-based pay supplement system was not applied to this year's salaries," adding, "It will take time to operate the system because we need to listen to the union's opinions." Furthermore, East-West Power's job-based pay supplement system determines 'who will receive how much additional salary,' so strictly speaking, it is difficult to consider it a job-based pay system that pays wages differently according to the job. KOTRA, which decided to abolish the seniority system and introduce a job-based pay system, initially planned to proceed with follow-up procedures such as board approval by the end of last month, but the process has stalled as the union opposed and demanded supplementary measures.

The government has been promoting the introduction of a job-based pay system for several years, which sets grades and determines wages based on job characteristics and values such as work intensity, difficulty, and level of responsibility. The wage system based on seniority was suitable during the high-growth period of the 1970s and 1980s, but it has significant side effects in today's organizational culture where individual ability, expertise, and competitiveness are emphasized. However, it remains difficult to reach labor-management agreements on the introduction of the job-based pay system, and still, 6 out of 10 large companies operate the seniority-based wage system where wages automatically increase according to years of service. Accordingly, the government decided in 2020 to include the introduction of the job-based pay system as an evaluation item in the management performance assessment of public institutions. This means that public institutions, which should set an example for the private sector, are urged to proactively introduce the job-based pay system.

This content was produced with the assistance of AI translation services.