Financial Public Enterprises Prepare to Introduce Job-Based Pay System with Salaries Differentiated by Job Roles (Comprehensive)

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 under the title "Request for Proposal for Improvement of Job-Centered Compensation System (Job-Based Pay System)" and is awaiting results expected by the end of this year. Since CEO Lee Jeong-hwan recently set "sufficient preparation" as a prerequisite for introducing the job-based pay system during labor-management talks, 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.

Within 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 tasks such as ▲establishing a compensation system improvement plan and setting implementation tasks ▲specific operational plans for compensation system alternatives, the corporation will request labor union consultations based on these results.

The job-based pay system differs from the seniority-based pay system, which automatically increases wages regardless of job performance based on years of service. Instead, it pays different wages according to the nature, difficulty, and responsibility level of the work. The seniority-based pay system, adopted by most financial public enterprises, has been effective in encouraging 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 the mismatch between performance and compensation has lowered work productivity.

CEO Lee Jeong-hwan: "Introduction after sufficient preparation" principle
Government pushes 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 push to introduce the job-based pay system and intends to reach 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 it is worth considering if the research results are acceptable, the possibility of labor-management agreement remains open.

The job-based pay system was a key labor-related campaign pledge of the Moon Jae-in administration. It is seen as a key to solving 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, covering three items: efforts to introduce the job-based pay system, compliance with compensation regulations such as budget 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 other two items will be integrated into 1.5 points.

Deposit Insurance Corporation completed research but failed in labor-management negotiations

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 performance-based pay system, which caused many controversies in the past. The labor unions oppose the introduction unless accompanied by sufficient increases in personnel budgets, fearing that the job-based pay system will lead to wage 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%. The Deposit Insurance Corporation conducted research related to the introduction of the job-based pay system early on, received results in the first half of this year, and held related discussions with the labor union. However, due to strong opposition, the push for the job-based pay system has stalled. Since the compensation system has already shifted from seniority-based to performance-based pay, many employees feel resistance to adjusting the compensation system again to fit the job-based pay system, and it is expected that labor-management negotiations will take time.

The Korea Credit Guarantee Fund, which reflects job-based pay at about 25% in its compensation system, commissioned a job analysis research project in the second half of 2018 and received results last year. It is currently in the process of gradually incorporating the system for systematic classification and application of job-based pay tailored to detailed organizational characteristics.

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 successful case of introduction after sufficient preparation is confirmed among public enterprises, other places may accelerate their progress."

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