By Yoon Ja-young
Strife is deepening between the unions and management of banks over adoption of performance-based salary systems. The Korea Financial Industry Union held a vote regarding whether to call a general strike in opposition to the management's plan for a merit-based payment system.
The vote was held at around 10,000 locations around the country, and the results will be announced Wednesday morning. If a majority of the labor union members approve the strike, which the labor union expects, there will be a nationwide strike in September.
Kim Moon-ho, head of the union, met Korea Federation of Banks Chairman Ha Yung-ku, Monday, to request that the federation stop preparing guidelines for a performance-based pay system. However, Ha reaffirmed that the new pay system is necessary.
The discord was triggered by a plan from the Korea Federation of Banks to present guidelines for performance-based pay. The federation, which represents bank management, requested a consulting firm to prepare the guidelines.
According to industry sources, the guidelines include expanding the wage gap between high and low performers in the same position to up to 40 percent of the salary. The performance-based pay will be applied not only at the managerial level but also to general employees. There will also be a gap in pay raises. The most productive employees can enjoy a pay raise up to 3 percentage points higher than low performers.
The government has been lobbying for the expansion of performance-based pay. Nine state-run financial institutions have succumbed, and now the government wants to expand the system to commercial banks.
Those who support meritocracy expect the measure to enhance efficiency and productivity. While the country's banking sector has been suffering from narrowing interest margins on falling interest rates, labor costs have been increasing with the aging of the workforce. According to a report by the Korea Economic Research Institute, the average monthly salary of the financial industry stood at 5 million won, much higher than average 3.2 million won of all industries. The wage rose steadily between 2006 and 2014 despite a global economic recession.
However, those working in the sector are voicing concerns. "It is true that something should be done about unproductive employees, but performance-based pay will lead to too much competition and no teamwork," an employee at a local commercial bank said.
Currently, pay is linked to the performance of each branch, encouraging cooperation and teamwork. Employees also fear that it can lead to sales irregularities, which will ultimately harm consumers. The union cites cases in countries such as the U.K., where excessive meritocracy led bank employees to sell financial products for their own interest, making the whole industry lose trust.
Strife is deepening between the unions and management of banks over adoption of performance-based salary systems. The Korea Financial Industry Union held a vote regarding whether to call a general strike in opposition to the management's plan for a merit-based payment system.
The vote was held at around 10,000 locations around the country, and the results will be announced Wednesday morning. If a majority of the labor union members approve the strike, which the labor union expects, there will be a nationwide strike in September.
Kim Moon-ho, head of the union, met Korea Federation of Banks Chairman Ha Yung-ku, Monday, to request that the federation stop preparing guidelines for a performance-based pay system. However, Ha reaffirmed that the new pay system is necessary.
The discord was triggered by a plan from the Korea Federation of Banks to present guidelines for performance-based pay. The federation, which represents bank management, requested a consulting firm to prepare the guidelines.
According to industry sources, the guidelines include expanding the wage gap between high and low performers in the same position to up to 40 percent of the salary. The performance-based pay will be applied not only at the managerial level but also to general employees. There will also be a gap in pay raises. The most productive employees can enjoy a pay raise up to 3 percentage points higher than low performers.
The government has been lobbying for the expansion of performance-based pay. Nine state-run financial institutions have succumbed, and now the government wants to expand the system to commercial banks.
Those who support meritocracy expect the measure to enhance efficiency and productivity. While the country's banking sector has been suffering from narrowing interest margins on falling interest rates, labor costs have been increasing with the aging of the workforce. According to a report by the Korea Economic Research Institute, the average monthly salary of the financial industry stood at 5 million won, much higher than average 3.2 million won of all industries. The wage rose steadily between 2006 and 2014 despite a global economic recession.
However, those working in the sector are voicing concerns. "It is true that something should be done about unproductive employees, but performance-based pay will lead to too much competition and no teamwork," an employee at a local commercial bank said.
Currently, pay is linked to the performance of each branch, encouraging cooperation and teamwork. Employees also fear that it can lead to sales irregularities, which will ultimately harm consumers. The union cites cases in countries such as the U.K., where excessive meritocracy led bank employees to sell financial products for their own interest, making the whole industry lose trust.
