Business group demands salary system overhaulThe Korea Chamber of Commerce and Industry (KCCI) said Thursday the current salary system must be restructured for older employees to fully benefit from legislation extending the retirement age to 60.
The National Assembly on Tuesday passed bills to extend the retirement age and mandate disclosure of the annual salaries of executives at large businesses to increase corporate transparency.
In a report released Thursday, KCCI said the current single payroll system that computes salary based on employees’ cumulative years at work will further widen the gap between the wages and productivity of older employees, forcing companies to seek voluntary early retirement.
It said 75.5 percent of Korean companies still pay based on the single payroll system, while the remainder set compensation based on performance.
Citing data from the Korea Labor Institute, KCCI said employee productivity drops significantly as they age in contrast to their surging salary.
It showed employees aged 55 or more get three times the salary of employees aged 34 or younger, but they are 82 percent as productive.
The KCCI report said restructuring the current wage system is the only way to enhance job security for older workers and that reducing salaries in return for additional years of work would help companies enhance productivity.
It said the government should come up with additional measures related to the revised bill for extension of the retirement age, such as mandating a salary peak system.
Under a salary peak system, employers would pay less after a certain age in return for guaranteeing employment until 60.
“Business circles understand the need for raising the retirement age, but in reality the substantial extension for middle-aged employees may face barriers unless Korea’s wage system based on seniority at work changes reasonably in tandem with corporate productivity,” said Park Jong-gap, a senior official at the KCCI.
By Kim Mi-ju [email@example.com]