By Choi Sung-jin
The seniority-based salary system of Korea's banking industry is facing scrutiny from government regulators.
According to industry sources, authorities want to reform the present payroll scheme, in which individual performances exert minimal influence on financial rewards. At a recent meeting with CEOs of 10 commercial banks, Governor Zhin Woong-seob, of the Financial Supervisory Service, also stressed the need to move closer to a performance-based pay system.
Korean banks now favor a mixed payment system that takes into account seniority and job performance. But as performance evaluations are done in groups rather than individually, too many bank workers who do not contribute to raising productivity are unfairly benefiting under this system and taking advantage of their colleagues' endeavors.
Financial authorities believe such a system masks the identity of low-performing employees. Actually, productivity per person at Korea's six largest banks fell 20 percent between 2012 and 2014, from 83.27 million won ($73,800) to 66.16 million won.
In addition, the average salary of Korean bank employees accounts for 205 percent of the nation's per-capita GDP, compared with 110 percent for their U.S. counterparts and 150 percent for Japanese workers.
The seniority-oriented flat salary step scheme is blamed for various ills of the banking sector, said industry experts, such as "absolutely high" wage levels, high shares of non-regular workers, inducement of early retirement and reluctance to hire younger workers. Unionized workers, as expected, vehemently oppose the government's move, ascribing the aggravating profitability to competitive commission cuts and low-interest quasi-policy loans for struggling industries and individuals.
The seniority-based salary system of Korea's banking industry is facing scrutiny from government regulators.
According to industry sources, authorities want to reform the present payroll scheme, in which individual performances exert minimal influence on financial rewards. At a recent meeting with CEOs of 10 commercial banks, Governor Zhin Woong-seob, of the Financial Supervisory Service, also stressed the need to move closer to a performance-based pay system.
Korean banks now favor a mixed payment system that takes into account seniority and job performance. But as performance evaluations are done in groups rather than individually, too many bank workers who do not contribute to raising productivity are unfairly benefiting under this system and taking advantage of their colleagues' endeavors.
Financial authorities believe such a system masks the identity of low-performing employees. Actually, productivity per person at Korea's six largest banks fell 20 percent between 2012 and 2014, from 83.27 million won ($73,800) to 66.16 million won.
In addition, the average salary of Korean bank employees accounts for 205 percent of the nation's per-capita GDP, compared with 110 percent for their U.S. counterparts and 150 percent for Japanese workers.
The seniority-oriented flat salary step scheme is blamed for various ills of the banking sector, said industry experts, such as "absolutely high" wage levels, high shares of non-regular workers, inducement of early retirement and reluctance to hire younger workers. Unionized workers, as expected, vehemently oppose the government's move, ascribing the aggravating profitability to competitive commission cuts and low-interest quasi-policy loans for struggling industries and individuals.
