[Aftermath of the Wage Peak System] Companies Busy Preparing Countermeasures Amid Labor's Hardline Mode

Concerns Over Labor-Management Conflicts After Supreme Court Ruling
Companies Say, "Extension of Retirement Age Is Not Invalid"
Economic Groups and Ministry of Employment Warn Against Overinterpretation

On the 8th, officials from the Public Institution Business Headquarters held a press conference in front of the Presidential Office in Yongsan-gu, Seoul, urging the abolition of the wage peak system guidelines and demanding labor-management negotiations. Photo by Jinhyung Kang aymsdream@

The aftermath of the Supreme Court ruling that declared the implementation of the 'wage peak system,' which reduces wages solely based on age without reasonable grounds, invalid is intensifying. This is because major conglomerate labor unions such as Samsung and SK have consecutively expressed their willingness to take legal action against their companies to abolish the wage peak system. In response, companies are busy preparing countermeasures, and the need for the government to establish 'guidelines' to minimize labor-management conflicts and confusion is being raised.

According to the business community on the 10th, the Samsung Electronics Labor Union Joint Negotiation Group sent an official letter on the 3rd to Samsung Electronics Vice Chairman Han Jong-hee and President Kyung Kye-hyun inquiring about the company's stance on the wage peak system.

In the letter, the union pointed out the recent Supreme Court ruling and stated that the company operates the wage peak system solely based on age without changes in work type or duties, which is clear discrimination, and demanded its abolition. They also demanded compensation for financial damages caused by the unreasonable operation of the wage peak system and notified that if compensation is not provided, they will hold the company accountable through 'litigation.'

In response, the company conveyed to the union that the wage peak system was decided in a reasonable and just manner as a retirement age extension type and that they intend to maintain the system.

Samsung Electronics introduced the wage peak system in 2014 when it extended the retirement age to 60. Initially, the system reduced wages by 10% each year starting at age 55 compared to the previous year's wage, but later extended the application age to 57 and lowered the wage reduction rate to 5%. A Samsung Electronics official explained, "The retirement age was extended, and the reduction rate was lowered, improving conditions favorably for workers," adding, "Especially, the wage peak system case pointed out by the Supreme Court is a retirement age maintenance type, so it is unrelated to Samsung Electronics' retirement age extension type."

The SK Hynix labor union also included the abolition of the wage peak system in this year's collective bargaining demands. SK Hynix has been applying the annual salary peak system from age 58 since extending the retirement age to 60 in 2015. Fixed wages decrease by 5% each year.

Companies are expressing concerns over the unions' demands for the complete abolition of the wage peak system. In Samsung Electronics' case, since there has been ongoing confrontation with the union during recent wage negotiations, the wage peak system issue is likely to become another axis of labor-management conflict.

However, there is also analysis that the impact will be limited since the 'retirement age extension type wage peak system,' which applies the wage peak system as a condition for extending the retirement age, does not fall under the age discrimination criticized by the Supreme Court. A significant number of domestic conglomerates such as Samsung Electronics and Hyundai Motor have introduced the 'retirement age extension type wage peak system.' A business community official said, "We are discussing countermeasures related to the Supreme Court's wage peak system ruling mainly through economic organizations," adding, "There is concern that the unions' strong demands to nullify even lawful wage peak systems might spark labor-management conflicts."

Meanwhile, regarding the Supreme Court ruling, the Ministry of Employment and Labor recently clarified in a statement that not all retirement age maintenance type wage peak systems are invalidated. The ministry pointed out that the Supreme Court's ruling should be examined based on four criteria: ▲the validity of the purpose of introducing the wage peak system, ▲the degree of disadvantage suffered by the affected workers, ▲whether the measures taken are appropriate and properly introduced, ▲and whether the reduced funds were used for the original purpose of introducing the wage peak system.

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