New and Forecast Departments to Strengthen Job-Based Pay System

Deposit Insurance Corporation (left) and Credit Guarantee Fund

[Asia Economy Reporter Eunju Lee] The Korea Credit Guarantee Fund and the Korea Deposit Insurance Corporation are set to strengthen their job-based pay systems. Both institutions have introduced job-based pay systems, but they received government evaluations deeming them to be at very low levels. However, since labor union agreement is essential for wage system changes driven by the strengthening of job-based pay, it is expected to take considerable time before actual changes are realized.

According to the financial sector on the 18th, the two financial public institutions have recently established plans to reinforce their current job-based pay systems. After receiving a D+ grade in the 2021 management performance evaluation under the indicator ‘Transition to a rational compensation system centered on job roles,’ both institutions internally set corrective action plans to strengthen the job-based system. According to the Ministry of Economy and Finance, a D+ grade is typically given when a job-based system has not been introduced or, if introduced, is evaluated as being at a low level.

The job-based pay system determines salaries differentially based on the nature, difficulty, responsibility, and intensity of tasks. Unlike the seniority-based pay system, where wages are determined by years of service, or the performance-based pay system, where wages are decided according to performance, wages under the job-based pay system are determined based on performance evaluations reflecting the relative value of the job. Currently, most financial public institutions maintain a mixed wage system that retains the seniority-based pay framework while determining a portion of the salary (around 20%) through job-based pay.

First, the two institutions plan to increase the proportion of job-based pay within the total annual salary. In the case of the Korea Credit Guarantee Fund, the proportion of job-based pay in total salary was 23.2% in 2021, and they plan to expand this. For the Korea Deposit Insurance Corporation, the job-based pay proportion was evaluated at 6% in last year’s management evaluation, and they are considering raising it to around 10% to 20%. A representative from the Korea Deposit Insurance Corporation explained, “In 2020, the job-based pay proportion was recognized as 30%, but with stricter evaluation criteria last year, the job-based pay proportions of public enterprises decreased. The Korea Deposit Insurance Corporation is currently conducting calculations to increase the proportion of job-based pay according to strict standards.”

They also aim to ease seniority and restructure the job grade determination system. The Korea Credit Guarantee Fund plans to improve its regular internal job analysis process while expanding the pay gap between job grades based on job segmentation. Additionally, they will restructure the job evaluation grade determination system to appropriately reflect job value. The Korea Deposit Insurance Corporation also plans to strengthen the job-based system by applying stricter evaluations to jobs even within the same rank.

However, the two institutions are expected to face significant challenges in strengthening the job-based system, as labor-management agreement is necessary during the wage system changes driven by the job-based system. Other financial public institutions, such as the Korea Housing Finance Corporation and the Korea Asset Management Corporation, have not yet prepared specific plans to strengthen their job-based systems. A financial sector official stated, “Most labor unions of financial public institutions oppose strengthening the job-based system, so negotiations are facing difficulties.”

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