Public Companies to Cut Salaries
By Lee Hyo-sik
Staff Reporter
The government forced state-invested companies early this year to cut the salaries of new recruits in 2009 as part of efforts to raise funds to financially help private businesses that practice ``job sharing'' and other schemes for retaining workers.
Now, public firms are being pressured to slash wages of executives and employees through the introduction of an annual salary system and a peak wage scheme in the second half of the year.
Employees are also expected to work in a more competitive environment as the government seeks to introduce a performance-based bonus system under which employees who work hard and get high marks on performance evaluations will receive larger bonuses than underachievers.
According to the Ministry of Strategy and Finance, Tuesday, the government will implement these and other measures to further streamline state firms and turn them into more efficient and profit-oriented organizations, following a series of plans unveiled to either privatize or overhaul 305 state enterprises and their 330 subsidiaries in August last year.
The government plans to slash up to 35,000 jobs, or 13.5 percent of the total payroll by the end of 2012.
The restructuring of public companies was one of President Lee Myung-bak's key campaign pledges. Lee criticized state-run companies for inefficiency, pointing out that they were operating without proper supervision and that their organizations have become bloated.
State enterprises have also been hit for focusing only on increasing the number of employees while neglecting to boost profitability and efficiency.
``We have so far worked on reorganizing public firms into a more efficient and slim entity. From now on, we will overhaul their compensation schemes. We will change the monthly salary structure into a yearly-based one and promote the performance-based bonus system to adjust wages downward,'' a ministry official said.
Currently, only about 96 public firms are practicing an annual salary system and most of them take only seniority into account when deciding wage levels, disregarding performance evaluations.
The official also said the government will encourage state enterprises to adopt the wage peak scheme to expand salary gaps between competent workers and under-performers.
The system, first introduced here in 2004, is a unique salary structure that cuts workers' wages starting at a certain age in return for job security. For instance, workers are usually entitled to retire at 60 but in reality, many are being forced to quit earlier.
As a compromise between unions and management, for example, starting at 57, a worker's pay is reduced each year by a certain percentage. Only about 10 state-run companies have so far adopted the wage peak system and the ministry plans to create a ``standard model'' for it to send to public companies.
Additionally, the government will instruct state firms to practice the performance-based compensation system to kick out those who function poorly and promote internal competition.
``They should compensate workers in accordance with their performance. The system will foster competition among employees and encourage them to work harder and provide better services to the public,'' the official said.