Moon's Pledge: Will 'Job-Based Pay System' Be First Introduced in Financial Public Enterprises?

Housing Finance Corporation to Deliver Research Service Results Within the Year
Labor-Management Talks Expected Based on Results
Union Persuasion Is Key

[Asia Economy Reporter Park Sun-mi] The Korea Housing Finance Corporation is increasingly likely to become the first financial public enterprise to introduce a job-based pay system as early as next year. The job-based pay system was a campaign pledge of President Moon Jae-in but has faced difficulties due to strong opposition from labor unions.

According to the financial sector on the 23rd, the Korea Housing Finance Corporation commissioned an external research institute in August with a request titled "Proposal Request for Improvement of Job-Centered Compensation System (Job-Based Pay System)" and is awaiting the results to be released within this year. Since Lee Jeong-hwan, president of the Korea Housing Finance Corporation, recently stated in labor-management talks that the prerequisite for introducing the job-based pay system is "sufficient preparation," if the research results come out within this year, it is highly likely that labor-management consultations will proceed early next year.

Currently, consulting work on items related to the job-based pay system, including ▲internal and external environment analysis and compensation system diagnosis ▲understanding employee awareness and demands regarding compensation ▲identification of mid- to long-term compensation system improvement tasks ▲job analysis and job classification system maintenance, has been completed.

By the end of this month, the corporation plans to complete ▲advancement of the job evaluation process ▲proposal of compensation system alternatives and impact analysis ▲collection of employee opinions and consensus building. Next month, after completing research on ▲establishment of compensation system improvement plans and setting implementation tasks ▲specific operational plans for compensation system alternatives, the corporation will enter into negotiations with the labor union based on these results.

The job-based pay system differs from the seniority-based pay system, where wages automatically increase with years of service regardless of job performance. Instead, it pays differently according to the nature, difficulty, and responsibility level of the work. The seniority-based pay system, adopted by most financial public enterprises, has effectively encouraged long-term employment and job security. However, with an aging population leading to many high-wage long-term employees, it has become difficult to secure new talent, and mismatches between performance and compensation have lowered work productivity.

President Lee Jeong-hwan: "Introduction after sufficient preparation"
Government pushing job-based pay system... From March next year, efforts to introduce job-based pay will be reflected in management evaluations

The corporation explained that it commissioned the research in preparation for the government's strong push for the job-based pay system and intends to make a conclusion after thorough evaluation and sufficient labor-management consensus. The labor union, rather than opposing the introduction of the job-based pay system in principle, has expressed willingness to review the proposal after seeing the research results. Since there are opinions within the union that if the research results are acceptable, they are worth considering, the possibility of labor-management agreement remains open.

The job-based pay system was a key labor-related election pledge of the Moon Jae-in administration. It is seen as a key to resolving inefficient organizational management and productivity decline in public enterprises, and the government is actively promoting its introduction. In particular, since the government decided to penalize public institutions that do not introduce the job-based pay system in management evaluations starting March next year, there are talks that the introduction of the job-based pay system in public enterprises is imminent.

In the existing management evaluation of public institutions by the Ministry of Economy and Finance, the score for the compensation system category was integrated into 3 points based on three items: efforts to introduce the job-based pay system, compliance with compensation regulations such as budget allocation guidelines, and performance of the wage peak system. However, according to the recently revised public institution management evaluation manual, from March next year, efforts to introduce the job-based pay system will be separated into 2 points, and the remaining two items will be integrated into 1.5 points.

Each public enterprise, considering the introduction of the job-based pay system a matter of time, faces the challenge of persuading labor unions that view the job-based pay system as essentially no different from the previously controversial performance-based pay system. The labor unions oppose the introduction unless accompanied by sufficient increases in the personnel budget, fearing that the job-based pay system will lead to pay cuts for certain groups.

As a result, among 336 public institutions, the current adoption rate of the job-based pay system is less than 1%. A financial public enterprise official said, "Although the government is pushing hard and the introduction of the job-based pay system in public enterprises is imminent, many still question whether sufficient preparation has been made." He added, "If a case of successful introduction after sufficient preparation is confirmed among public enterprises, other institutions may accelerate their implementation processes."

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