Chaebol vets see pay cuts

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Chaebol vets see pay cuts


Nearly half the companies affiliated with the nation’s top 30 conglomerates have adopted the so-called “peak wage system,” and many others said they were considering adopting it, according to a government survey released on Wednesday.

Of the 378 companies surveyed, 177 have adopted the new wage system, a report by the Ministry of Employment and Labor showed.

Among the 275 companies of the top 15 conglomerates, 151, or 55 percent, said they have adopted the system of lowering the salaries of workers in their last few years on the job.

The Samsung Group decided in 2014 to adopt the system at all of its affiliates and plans to complete the conversion at all of the workplaces by 2017.

At the 103 affiliates of the conglomerates ranked 16-30 in size, which include LS, Kumho Asiana, Dongbu, Daelim and Korea Railroad (Korail), only 26 - about a quarter of the total - have followed suit.

About 54 percent of the 30 conglomerates’ companies have started to cut salaries for employees at age 56 or 57, the report said. Just under 30 percent of the companies begin lightening paychecks for workers at age 58; another 12 percent began at age 59.

The size of the cuts depends on the age of the worker and the cuts deepen as an employee approaches retirement. Those aged 60, the usual retirement age, receive an average 40 percent less in salary than they did in their peak earning year. The reduction is an average of 34 percent at age 59, 27 percent at age 58, 19 percent at age 57 and 10 percent for 56-year-old workers.

Companies using the system apply it to engineers and other technical staff as well as to business and administrative employees.

The controversial wage system, being pushed by the government, was proposed because Korea’s retirement age will be set at 60 beginning next year at all private and public companies; the average retirement age now is 57. The peak system is mandatory at government corporations and organizations, and the government is pressing the private sector to follow suit.

The government says the peak wage system is necessary to give companies room to hire new college graduates. Unions are suspicious, saying they don’t believe the retirement age will actually be extended at all companies, particularly at small ones, and the new system is merely a ruse to save money at the expense of workers.

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