Reforming Salary System
Samsung Electronics introduces a salary peak system this year, while extending the retirement age to 60.
Samsung’s salary system reform at this time is expected to create a breakthrough in the other big businesses’ related discussions. They have been unwilling to move ahead with discussions so far, although the retirement age is extended to 60 by law from 2016. The entrepreneurs are insisting on the introduction of a salary peak system in order to cope with increasing labor costs, with the retirement age scheduled to be extended soon.
Few Korean companies have adopted the system though. According to the Ministry of Employment and Labor, just 16.3% of the companies with at least 100 employees ran it as of the end of 2012. They include GS Caltex, Daewoo Shipbuilding & Marine Engineering, LG Electronics, and LS Cable & System.
In the meantime, those with 300 or more employees and the rest are required to extend their retirement age to 60 in 2016 and 2017, respectively. This is based on the revision to the Act on Prohibition of Age Discrimination in Employment and Aged Employment Promotion, which passed the National Assembly in April last year.
The revision includes no mandatory provision about a peak salary. Instead, just an ambiguous clause was added during the parliamentary passage, reading, “An employer and the representative of employees have to take action, if deemed necessary, such as wage system reform.” The National Assembly stopped there because of the possible opposition from the labor world.
Under the circumstances, it is predicted that the introduction of a peak salary system will be one of the hottest issues, along with the normal wage, in pay negotiations down the road.