Hyundai Motor Group to Pursue Two Track Strategy for Peak Wage System

The Hyundai Motor Group announced on Aug. 11 that it will implement a group-wide peak wage system starting next year. However, the group will pursue a “two track” strategy that applies the system to office executives first and production workers later.

Since the group said that it will adopt the system next year, rather than completing the adoption by the end of next year, it is expected to apply the system to some subsidiaries first and gradually expand it to all.

However, there are provisos about the implementation of the peak wage system. Some subsidiaries will implement the system with their executives first, and continuously hold talks with the unions in order to expand the system to all employees.

Also, Hyundai Card and Hyundai Capital Services, financial affiliates which are smaller and have no unions among the 41 subsidiaries of the group, will introduce the peak wage system starting next year.

Hyundai Engineering & Construction agreed the adoption in Jan. Industry sources say that Hyundai Motor and Kia Motors will apply the system to its production workers at least within a few years, though it will be difficult to implement it starting next year. 

The Hyundai Motor Group has decided that the retirement age of workers will be increased to 60 at all affiliates. However, it will decide the exact details of the policy, including a starting point for salary reductions and its amount, after negotiations with their respective labor unions. 

Experts both inside and outside the company believe that this move came after discussion with the government. A high-ranking government official said, “The group must have discussed the issue with the Ministry of Employment and Labor in advance.”

Indeed, President Park Geun-hye said in a televised speech on Aug. 6, “We should introduce the wage peak system, which put off retirement and reduces wages for older workers, so we can create more jobs for young people.” On Aug. 10, she also said, “Conglomerates should have a social responsibility to hire more young people.”