Most Read Contributor in South Korea, February 2017
The government announced guidelines in 2016 pushing for
broader implementation of performance-based pay in the public
sphere. The government indicated that it would penalize
state-controlled enterprises with reduced funding if they failed to
follow the guidelines, and many state-controlled enterprises
adopted the recommended changes. This effort is a continuation of
earlier initiatives aimed at reforming public enterprises,
specifically measures to increase efficiency in 2014, and
implementation of a wage-peak system in 2015.
The government justified its decision to implement
performance-based pay more broadly at state-controlled enterprises
on the grounds that public-sector productivity is only 70-80% of
productivity in the private sector, there is a lack of internal
competition at state-controlled enterprises, and their
organizational and remuneration systems do not provide proper
motivation to their workers.
The government had already introduced more limited
performance-based pay primarily for executives and senior
management, in 2010. Whereas the government's 2016 guidelines
required state-controlled enterprises to implement
performance-based pay more broadly, so as to cover lower-level
employees; and to increase the weight that performance ratings have
on ultimate take-home pay.
Organized labor opposed the guidelines, and engaged in or
threatened industrial action including strikes. Labor groups also
commenced legal disputes challenging the changes. A major basis for
those challenges is the claim that the enterprises amended their
Rules of Employment (workforce rules) without any agreement from
the union, which is normally required in the case of a change
adverse to employees.
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