By Choi Kyong-ae
Banks moving to introduce a performance-based pay are drawing strong protests from unions, which believe this will result in massive layoffs.
The financial regulator has long directed financial firms to shift away from the current seniority-based pay system to sharpen their competitive edge.
On Nov. 12, Financial Services Commission (FSC) Chairman Yim Jong-yong said the financial regulator will outline plans by the end of the year to push the merit-based remuneration system at banks and other financial firms as part of reforming the sector.
Last week, Kim Dae-hwan, chairman of the Economic and Social Development Commission under the presidential office, said dialogue between labor, management and government will soon begin to transform the existing wage system into an "effective" one.
However, the Korean Financial Industry Union (KFIU) which represents workers at banks and financial institutions called the steps "unilateral" and a clear violation of the labor-management-government agreement signed on Sept. 15.
Under the trilateral agreement, details of a planned revision to the current salary system are scheduled to be discussed later between financial firms, their unions and the government.
"Without any discussion on the details, the authorities are forcing banks and other lenders to readjust wage levels for employees based on their performance reviews on a yearly basis," said a KFIU spokesman. "But it is a matter for negotiations between labor and management, not an issue guided by the government."
NongHyup Financial Group and KB Financial Group have been quick to respond in terms of the performance-based pay scheme following Yim's remarks.
On Tuesday, KB Financial Chairman and Chief Executive Yoon Jong-kyoo said it was essential to introduce a performance-based salary system for all business entities to stay competitive.
"In October, KB Kookmin Bank adopted the so-called self-performance review program in which employees can compare their performance to their colleagues' in the same job; but temporarily suspended it due to strong protests from its union which saw it as initial step to have the performance-based pay system at KB," a bank spokesman said.
On Thursday, NongHyup Financial Chairman and CEO Kim Yong-hwan said the bank will promote executives and employees based on their performance from December.
As FSC Chairman Yim recently picked transformation of the current seniority-based pay system into a performance-based one as one of the top priorities to be sought in financial reform, union workers have good reasons to balk at his remarks, analysts said.
"Banks have cut their workforces since the 2008 financial crisis to survive lower margins and tougher competition. It is not for the government to urges commercial banks — not state-run banks — to cut workers. Banks cut jobs through consultations with their unions," Eugene Investment & Securities analyst Kim In said.
So Jae-yong, an analyst at Hana Financial Investment, said the government is apparently revising the wage system in the financial industry which offers a higher salary compared to manufacturers, before going after the latter. "And then it appears to be aiming at revising the pay system at manufacturers," he said.
Banks moving to introduce a performance-based pay are drawing strong protests from unions, which believe this will result in massive layoffs.
The financial regulator has long directed financial firms to shift away from the current seniority-based pay system to sharpen their competitive edge.
On Nov. 12, Financial Services Commission (FSC) Chairman Yim Jong-yong said the financial regulator will outline plans by the end of the year to push the merit-based remuneration system at banks and other financial firms as part of reforming the sector.
Last week, Kim Dae-hwan, chairman of the Economic and Social Development Commission under the presidential office, said dialogue between labor, management and government will soon begin to transform the existing wage system into an "effective" one.
However, the Korean Financial Industry Union (KFIU) which represents workers at banks and financial institutions called the steps "unilateral" and a clear violation of the labor-management-government agreement signed on Sept. 15.
Under the trilateral agreement, details of a planned revision to the current salary system are scheduled to be discussed later between financial firms, their unions and the government.
"Without any discussion on the details, the authorities are forcing banks and other lenders to readjust wage levels for employees based on their performance reviews on a yearly basis," said a KFIU spokesman. "But it is a matter for negotiations between labor and management, not an issue guided by the government."
NongHyup Financial Group and KB Financial Group have been quick to respond in terms of the performance-based pay scheme following Yim's remarks.
On Tuesday, KB Financial Chairman and Chief Executive Yoon Jong-kyoo said it was essential to introduce a performance-based salary system for all business entities to stay competitive.
"In October, KB Kookmin Bank adopted the so-called self-performance review program in which employees can compare their performance to their colleagues' in the same job; but temporarily suspended it due to strong protests from its union which saw it as initial step to have the performance-based pay system at KB," a bank spokesman said.
On Thursday, NongHyup Financial Chairman and CEO Kim Yong-hwan said the bank will promote executives and employees based on their performance from December.
As FSC Chairman Yim recently picked transformation of the current seniority-based pay system into a performance-based one as one of the top priorities to be sought in financial reform, union workers have good reasons to balk at his remarks, analysts said.
"Banks have cut their workforces since the 2008 financial crisis to survive lower margins and tougher competition. It is not for the government to urges commercial banks — not state-run banks — to cut workers. Banks cut jobs through consultations with their unions," Eugene Investment & Securities analyst Kim In said.
So Jae-yong, an analyst at Hana Financial Investment, said the government is apparently revising the wage system in the financial industry which offers a higher salary compared to manufacturers, before going after the latter. "And then it appears to be aiming at revising the pay system at manufacturers," he said.
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