Local institute says peak wage system would cut labor costs

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Local institute says peak wage system would cut labor costs

If Korea’s companies adopt the so-called peak wage system, it would cut 25.9 trillion won ($23.1 billion) of their labor costs over the next five years, a local institute said Sunday.

According to a report by the Korea Economic Research Institute, Korean companies will have to pay an additional 100 trillion won in total by 2020 when the retirement age is raised to 60, starting next year.

However, the burden will be eased if companies adopt the peak wage system, in which employers gradually cut wages for senior employees aged around 55 before they retire.

The report, written by the institute under the Federation of Korean Industries, the nation’s largest business lobbying group, came as a number of labor unions are protesting the idea.

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