Salary Freeze
Starting next year, local private and public companies with more than 300 employees will be required to extend the retirement age to 60. Accordingly, they are currently scrambling to adopt a wage peak system, in which an employee's salary is reduced at a certain age in return for job security. Focusing on the manufacturing industry, it is inevitable that domestic businesses will struggle with mounting labor costs if they extend the retirement age with no options.
The fact that both the labor and management of POSCO decided to revise the wage system will have a great ripple effect on the domestic manufacturing industry overall.
According to economic industry sources on Aug. 26, it is hard to find domestic companies that are abolishing the salary step system for their production employees. As of March, surveys of the nation’s 30 largest business groups in terms of sales on their wage systems show that 40 percent, or 12, of the respondents will apply the salary step system to all employees, including production and office workers, while 56.7 percent, or 17, of them implement the system for only production employees. Accordingly, nearly 97 percent of the conglomerates stick to the salary class system regardless of employees’ work ability or performance.
In particular, the wage system is deeply rooted in the jobs of the large-scale manufacturing sector, which consist of mostly hardliner unions.
Since it consequentially produces stiffness in the labor market, most production employees are in their forties or fifties in heavy industries.
By industry, LG Electronics will implement a step-based salary system to production employees in the electronics industry, while Samsung Electronics will hire high school graduates with the system, then change to an annual salary system after a certain period of time.
Companies in the shipbuilding industry, including Hyundai Heavy Industries and Samsung Heavy Industries, will also implement the salary step system for production employees. In the automobile industry, Renault Samsung Motors, a foreign-affiliated joint company, is the only company that will do away with the salary class system. Although Hyundai Motor has pushed ahead with the abolition of the system, it has been stalled due to strong opposition by its union.
Among the top 30 business groups, CJ is the only one to be reforming the wage system. Considering the fact that its core businesses are food and services, however, almost all manufacturing-centered conglomerates that need a large-scale workforce have a step-based salary system.
Industry experts say that wage system reform is slow due to an opposition of the unions and difficulties in finding reasonable models.
Hyundai Motor proposed the abolition of the current step-based salary system in the 8th meeting to reform the wage system and improve ordinary wages before summer vacation, but the company immediately withdrew the proposal after facing union opposition. Accordingly, Hyundai Motor proposed a new wage system that retained the current system while introducing a performance-based system in the 9th meeting held on Aug. 20.
If POSCO establishes a new performance-based wage system in the year ahead, it will become a good paradigm not only in the steel industry but also other manufacturing industries.