"Additional Wages of 175.6 Billion KRW Arise if Bank Wage Peak System is Abolished"

Members of the National Financial Industry Labor Union KB Kookmin Bank Branch held a press conference condemning KB Kookmin Bank's "illegal wage peak system" in front of the new building of KB Kookmin Bank in Yeouido, Seoul, on the morning of the 4th of last month.
[Image source=Yonhap News]

[Asia Economy Reporter Buaeri] If the wage peak system is abolished in domestic banks, the increase in wage costs this year alone is estimated to reach about 175.6 billion KRW. Among these, financial public enterprises such as Korea Development Bank, Industrial Bank of Korea, and Export-Import Bank of Korea, which have many employees under the wage peak system, accounted for about 70%.

According to the 'Status of Domestic Banks' Wage Peak System' received by Rep. Kang Ming-guk of the People Power Party from the Financial Supervisory Service on the 6th, as of the end of May, 2,180 employees (1.93%) out of a total of 113,046 bank employees were under the wage peak system.

The proportion of employees under the wage peak system increased annually from 1.28% in 2019 to 1.48% in 2020 and 1.91% last year.

By bank, Korea Development Bank had the highest proportion of wage peak system employees, with 384 out of 3,913 employees, accounting for 9.81%. This was followed by Industrial Bank of Korea at 7.07% (982 employees), Export-Import Bank of Korea at 2.94% (37 employees), Kookmin Bank at 2.22% (369 employees), and Woori Bank at 2.17% (299 employees). While private banks often encourage employees to retire early before entering the wage peak system through voluntary retirement programs, financial public enterprises find it difficult to allocate funds for voluntary retirement, so employees tend to go through the wage peak system and work until retirement age.

The total wages paid to employees under the wage peak system in domestic banks over the past three years amounted to 572.547 billion KRW. This increased annually from 155.038 billion KRW in 2019, 179.353 billion KRW in 2020, to 238.156 billion KRW in 2021. For this year, wages paid up to May amounted to 93.086 billion KRW.

Looking at the wage scale paid over the three years by bank, Industrial Bank of Korea paid the most at 218.723 billion KRW (38.2%), followed by Korea Development Bank at 109.754 billion KRW (19.2%), and Kookmin Bank at 107.192 billion KRW (18.7%).

Moreover, with the recent Supreme Court ruling invalidating the wage peak system causing confusion in the business community, concerns are rising over the increased wage costs due to the abolition of the wage peak system.

According to an investigation by Rep. Kang's office on the expected wage increase costs if the domestic banks' wage peak system is abolished, the increase in costs this year alone is estimated to reach 175.588 billion KRW.

The expected increase in costs is highest at Korea Development Bank with 73.235 billion KRW, followed by Industrial Bank of Korea (49.4 billion KRW), Kookmin Bank (28.536 billion KRW), Woori Bank (15.213 billion KRW), Export-Import Bank of Korea (3.429 billion KRW), Shinhan Bank (1.836 billion KRW), SC First Bank (1.376 billion KRW), and Hana Bank (1.191 billion KRW). The three financial public enterprises?Industrial Bank of Korea, Korea Development Bank, and Export-Import Bank of Korea?accounted for about 126 billion KRW, or 71% of the total wages paid to wage peak system employees over three years.

Rep. Kang said, "Following the Supreme Court ruling, if labor unions demand the invalidation of the entire wage peak system or reduction in wage cuts across the banking sector, there is concern about harm to the public. Since litigation issues vary by bank, it is difficult to prepare a common response. The Financial Services Commission should conduct a survey and review of the wage peak system in the financial sector," he pointed out.

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