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Employers criticize Supreme Court ruling against peak wage system
The Seoul Metro union holds a rally in front of the Government Complex Seoul calling for the abolishment of the peak wage system in this 2019 file photo. Yonhap
By Park Jae-hyuk
By Park Jae-hyuk
Business lobby groups expressed concerns, Thursday, about potential side effects from the Supreme Court's ruling against the peak wage system, which has been implemented by many domestic companies to gradually reduce the salaries of older workers before retirement.
The lobby groups claimed that nullifying the system will weigh further on employers, causing job instability.
Earlier that day, Korea's Supreme Court ruled in favor of a former research institute worker, who had filed a lawsuit to demand reimbursement for wages lost before his retirement.
The top court judged the peak wage system to be illegal, saying that workers and people who want to work should not be discriminated against on the basis of age without a reasonable cause.
The Act on Prohibition of Age Discrimination in Employment and Aged Employment Promotion prohibits discrimination against workers on the basis of age.
“It is difficult to say that there was a difference in the level of goals given to the plaintiff or the content of the work before and after the introduction of the peak wage system,” it said.
The Supreme Court building in Seoul / Korea Times file
In response, the Federation of Korean Industries (FKI), a lobby organization for Korea's major conglomerates and associated members, issued a statement saying that the recent ruling will intensify difficulties and confusion throughout businesses.
“Since the legal minimum retirement age was fixed at 60 in 2016, both labor and management were forced to take measures needed for the wage system reform,” Choo Kwang-ho, the FKI's economic research division head, said in the statement. “As a result, many companies have adopted the peak wage system to pursue job stability of their employees and ease their own burden.”
The FKI asked the court to be more prudential in its forthcoming rulings on similar cases, so that the peak wage system can play its own role of creating jobs for people of all ages.
The Korea Chamber of Commerce and Industry (KCCI), a lobby group that promotes development of Korea's commerce and industries, also expressed concerns about the ruling.
“The peak wage system was necessary under the seniority-based pay system,” said Kang Seok-gu, head of the KCCI's research division. “If it is nullified, employees both young and old will face job instability.”
He also pointed out that resulting lawsuits will reduce the competitiveness of Korean companies.
The Korea Enterprises Federation (KEF) emphasized that the peak wage system was introduced to prevent older workers nearing retirement age from losing their jobs abruptly, while creating jobs for young people.
“We hope that the court will be prudent in forthcoming rulings, considering the possible impact of its rulings on businesses,” the KEF said in its statement.