[Exclusive] Bank of Korea "Wage Increase This Year is a Must"... Restoring 5% Cut from 2009

Two-Phase Raise Implementation
Reducing Welfare Benefits and Increasing Wages

[Asia Economy Reporter Seo So-jeong] The Bank of Korea (BOK) is set to urgently pursue the restoration of wage cuts, a long-standing issue, as early as the second half of this year. Although the BOK cut wages by 5% in May 2009 following the global financial crisis, it has not restored them since. The bank is currently proceeding with related procedures to normalize wages in two phases going forward.

According to the BOK on the 11th, following the 2009 public institution modernization policy, wages were uniformly cut by 5% and have effectively remained frozen since then. The bank is now pushing for a wage increase. From 2008 to 2021, the BOK’s average annual wage increase rate was 1.4%, which is below the average annual consumer price inflation rate of 2%.

At that time, institutions such as KDB Industrial Bank and Export-Import Bank, which simultaneously cut wages, completed wage restoration several years ago. Recently, the Financial Supervisory Service (FSS) also began phased wage increases, creating an internal sense of urgency at the BOK that it can no longer delay.

This move was particularly triggered last year when the FSS began procedures to restore wage cuts. The FSS decided that the Financial Services Commission, which controls the budget, would normalize the wage cuts in exchange for reducing some welfare benefits that had been pointed out by the Board of Audit and Inspection, and is currently proceeding with related procedures.

Taking this as a reference, the BOK reached a labor-management agreement at the end of March to increase wages while reducing employee welfare programs that had been raised as audit issues in 2014 and 2018. This includes reducing health checkup benefits for employees and abolishing the use of petition leave for events such as children’s school entrance and graduation ceremonies, deaths of relatives, residential moves, and social service, requiring employees to use their annual leave instead.

Lee Jae-hwa, head of the BOK’s Salary and Welfare Team, said, "We had been providing childcare allowances for preschool children under seven, but as the government expanded childcare allowances, the Board of Audit and Inspection pointed out the issue of overlapping support." He added, "There were concerns about reducing welfare benefits amid the low birthrate situation, but strong employee demands for wage increases led to the labor-management agreement." Lee also stated, "To improve the audit issues, internal regulations must be revised, and after reporting and confirming the revisions with the Board of Audit and Inspection, consultations with the Ministry of Economy and Finance are required. Although significant procedures remain, the goal is to complete this within the year."

Since Governor Lee Chang-yong took office, the BOK, currently finalizing a high-intensity organizational innovation plan, plans to announce related details around June 12, the bank’s 72nd anniversary. Governor Lee, who has extensive experience with international organizations such as the International Monetary Fund (IMF), is actively contributing additional opinions to the organizational innovation plan, which expands on the ‘Mid-to-Long-Term Development Strategy BOK2030’ established during former Governor Lee Ju-yeol’s tenure, supporting the transformation of the BOK.

Yoo Hee-jun, chairman of the BOK labor union, emphasized, "Governor Lee has agreed to meet with the union roughly every two months going forward, which is a groundbreaking change that did not exist in the past." He added, "While the organizational innovation plan that strengthens communication and expertise is important, it will be difficult to lead organizational innovation without wage normalization."

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