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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