Merit pay system scrapped

By Yoon Ja-young

State-invested companies will scrap the merit pay system enforced by the previous Park Geun-hye administration.

The public institutions steering committee under the Ministry of Finance and Strategymet Friday and decided not to penalize state-run enterprises for not adopting the system.

“The companies that have adopted the merit pay system can choose to withdraw it,” the committee said. “We will not take it into account in evaluating the performance of each state-run enterprise.”

Under the system, employees are judged on their achievements. Those evaluated as the best get over 10 million won more in annual pay than those deemed the worst.

The new pay system had been applied to managerial-level workers only — around 7 percent of the public service workforce. But the Park administration planned to expand it to 70 percent of the workers.

However, labor unions fiercely resisted the plan, claiming it doesn’t suit the public sector where cooperation for public interest should have priority over competition and profits. The rail workers’ labor union, for instance, said the merit pay system is likely to motivate workers to hide minor safety problems they detect for fear of getting poor evaluations.

But the Park administration pressured state-run enterprises to adopt the system as part of public sector reform aimed at enhancing efficiency. As a result, 120 state-run enterprises adopted the system, but many got approval from their boards of directors rather than agreement from their labor unions. Therefore, dozens of public entities have begun legal action to nullify the decisions, citing undue process.

Scrapping of the merit pay system was expected after President Moon Jae-in pledged to abolish it during his election campaign.

Despite opposition to the new system, workers at state-run entities received incentives worth 160 billion won last year for adopting it.

The KoreaConfederationofTradeUnions and the FederationofKorean TradeUnions, the country’s two umbrella union groups, said the workers should return the money following the nullification of the system. They said it should be spent on improving working conditions for irregular workers and on hiring more young people in the public sector.

Experts, however, say the public sector needs pay reform because the system doesn’t reflect performance. Some suggest a “job classification pay system” in which each worker’s wages are determined by the value of the work, such as the level of difficulty.

“The labor unions of the public sector should also seek alternatives for the current pay system,” Chae Jun-ho, a professor at Chonbuk National University, said. “There should be revision, but it should be based on fair procedure and guarantee stable basic pay.”