KCCI "Minimize Wage Increases in Large Corporations, Prefer Performance-Based Pay Over Fixed Salary"

KCCI Sends '2021 Wage Adjustment and Corporate Wage Policy Management Recommendations' to Member Companies
Encourages Companies with Capacity to Use Resources for Employment Expansion and Improving Management Conditions of Small and Medium Partners
Urges Efforts to Reform Seniority-Based Wage System to Job and Performance-Based System

[Asia Economy Reporter Kim Hyewon] The Korea Employers Federation (KEF) has recommended that high-wage large corporations implement this year's wage increases at the minimum necessary level. The intention is for companies with good performance to minimize increases in fixed wages such as base pay and instead compensate workers through temporary performance-based bonuses. Additionally, for companies with available resources, KEF advised actively utilizing secured funds for employment expansion or improving the management conditions of small and medium-sized partner companies rather than wage increases.

KEF announced on the 9th that it sent the "2021 Wage Adjustment and Corporate Wage Policy Management Recommendations" to its member companies on the 7th.

The recommendation focuses on "employment expansion," "resolving social disparities," and "establishing a fair compensation system," considering the recent overall conditions of the Korean economy, including uncertainties in economic recovery due to COVID-19, worsening youth unemployment, and widening sectoral gaps.

Regarding the basic principles for this year's wage adjustments, KEF emphasized that the recovery from last year's economic shocks caused by COVID-19 varies significantly by industry and company size. It also highlighted that excessive wage increases for high-wage workers in large corporations could cause relative deprivation among small and medium-sized enterprises and vulnerable groups, potentially leading to social conflicts. While there is no problem with companies rewarding workers for good performance last year, considering the characteristics of Korea's seniority-based wage system, KEF recommended that such rewards also be given in the form of temporary performance bonuses.

KEF expressed concern that the private sector employment slump has continued for a long time in the current labor market, and youth unemployment, which affects the future generation, is particularly severe. It also noted that wage and working condition disparities within the labor market remain unresolved. Therefore, KEF stressed that if companies with already high wage levels and payment capacity refrain from wage increases and use those resources for job creation and support for small and medium-sized partner companies, it would promote ESG (Environmental, Social, and Governance) management fulfilling corporate social responsibility and further contribute significantly to establishing a foundation for social integration. When the average monthly wage of workers at workplaces with 5 to 9 employees is set at 100, the average monthly wage of workers at workplaces with 500 or more employees was found to be 199.1, higher than France (157.7), the United States (154.2), and Japan (129.6).

Furthermore, KEF requested that Korean companies reform their wage systems from the existing seniority-based wage system to a job- and performance-based wage system that reflects the value of work, individual performance, and corporate results to build a fair and flexible labor market. In particular, KEF stated that it will actively engage in policy proposals to improve related systems, such as easing the rigidity of procedures for changing wage systems, to ensure that Korean companies face no difficulties in establishing fair and rational compensation systems.

Ryu Kijeong, Executive Director of KEF, emphasized, "Considering the uncertainties in the economic and labor market environment deepened after COVID-19, it is more urgent to expand employment and establish a job- and performance-based compensation system to create a fair labor market rather than further increasing the already high wage levels of domestic large corporations."

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