By Kim Jae-kyoung

Major global companies such as SC Korea are struggling in their attempts to introduce a merit-based compensation system here. They face strong opposition from labor unions, which insist the new scheme may erode employees’ benefits.

One global compensation expert said that it will take time for meritocracy to be accepted by unions here but the move is a step in the right direction.

“In general, we observe the trends of moving away from a seniority-based value proposition, and gradually shift toward a performance-based proposal. This change, like any other changes, will not be easy, but will eventually happen,” Diana Yang, the regional compensation practice leader in the Technology Sector of Aon Hewitt Asia Pacific, said in an interview with Business Focus.

“It is true that labor unions in Korea are very strong, companies should be aware of this issue in particular. However, in the long term, employers, especially multinationals, will evaluate their investment based on productivity.”

She pointed out that over-protection will make multinationals cautious in hiring and expanding in the local market.

“Labor unions will mature over time, and tend to protect their employee’s job security and benefits for the long-term. We are observing a similar situation in Germany and some cities in the United States,” she added.

The following is an excerpt from the interview.

Q: How can a company come up with a desirable pay mix to maximize work efficiency and reduce costs?

A: A proper pay mix is a balanced decision, taking into consideration the industry, job nature, job level, and business drivers especially in sales incentives ― such as product nature, sales model, sales cycle, marketing support and market maturity.

Q: Can you pick a couple of global companies that other firms can model themselves after in terms of compensation and reward scheme?

A: Good companies do not simply follow the market, they know the market practice, but focus their resources on a few items that differentiate themselves, and communicate it properly so that it becomes part of employer branding.

Q: Many companies have a difficult time in managing their workforce due to compensation and benefit programs following mergers and acquisitions. What would be your advice for them to solve this problem?

A: Compensation and benefits integration in mergers and acquisitions is probably the most complicated issue in compensation and benefits consulting. Our observation is every case is different and needs special expertise to handle every single case.

General advice is that both the acquirer and target, both line managers and HR, need to align on the integration strategy, before getting into technical compensation and benefits details, and a good integration strategy should keep business synergy as the ultimate goal.

kjk@koreatimes.co.kr