Majority of Korean companies still use seniority wage system

선진국은 직무성과중심 임금체계... 한국은 호봉제가 65%
Competition is fierce in the global market.
Korean companies are struggling to keep up... as they continue to face hurdles such as a sluggish economy and an aging society.
Under such conditions... there has been a growing call for local firms to make drastic changes to an outdated wage system.
A performance-based pay system instead of seniority-based... our Lee Minyoung reports.
If you're looking for the highest paid worker in a Korean office, just find out who's been there the longest.

Traditionally, the longer you've been at a company, the more money you earn.
In Korean corporate culture, this is commonly referred to as the seniority wage system.

Data from the Ministry of Employment and Labor shows that in 2009, 72-point-2 percent of Korean companies were employing the seniority-based system.

That figure dropped to about 65% percent last year.

Still, most businesses have stuck to the conventional salary system rather than switching to performance-based wages... adopted by most developed countries.

Since the 1960s, Japan has shuffled through various wage systems... In the 2000s, it finally adopted its own unique job-based wage system, integrating features of the seniority wage system and performance-based pay.
Now it's implemented in most leading Japanese companies like Mitsubishi and Canon.

In the U.S., many employers have adopted the so-called "broadbanding" system, which reduces job grades but offers more flexibility and supports lateral movement.

Management and business lobby groups in Korea have long been pointing to the need for a new salary system among companies as the labor environment is changing rapidly.

"The seniority-based pay system was suitable during the years when Korea achieved remarkable economic growth, but the business landscape has changed. Now the wage system seriously limits our performance in an increasingly competitive global market."

Labor unions, however, remain opposed to performance-based pay, claiming it will lead to wage and job cuts,... but amid a sluggish economy and fast aging society, experts say introducing the merit-based system is not only pressing but long overdue.
Lee Minyoung, Arirang News.


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