Hyundai Motor Group says it will adopt peak wage systemHyundai Motor Group announced Tuesday it will adopt the peak wage system starting next year, which gradually cuts the wages of employees in the years leading up to their retirement.
The company said the decision was made in response to the youth unemployment crisis. Since Hyundai Motor Group is the nation’s biggest business unit, with about 48,000 labor union members, industry insiders say the government’s efforts to expand the wage system would speed up if the decision is realized.
The group’s two automakers - Hyundai Motor and Kia Motors - have already said they will adopt the system, but this is the first time that Hyundai Motor Group, which runs 41 affiliates including auto parts maker Hyundai Mobis and steelmaker Hyundai Steel, has declared intentions to apply the system to all companies under its umbrella.
As a part of the process, Hyundai Motor Group said it will extend all employees’ retirement age to 60.
The current retirement age is 57 for Hyundai Steel and Hyundai Engineering & Construction and 58 for Hyundai Motor, Kia Motors and Hyundai Mobis.
The company also said that the peak wage system will help it reduce labor costs and, ultimately, hire more young workers
“After instituting the peak wage system, we will try to hire 1,000 additional workers per year,” said Hyundai Motor Group in a statement. “We will also try to help employees who are only a few years from retiring develop post-retirement plans, including teaching them how to establish their own business.”
It remains to be seen, however, whether or not the company’s labor union will accept the decision.
The union, for example, recently demanded the company extend the retirement age to 65. Hyundai Motor Group said it will discuss the issue with its labor union in order to successfully implement the system.
Industry insiders say Hyundai’s decision will influence other companies to adopt the peak wage system, which has been urged by President Park Geun-hye’s administration as part of its labor reform. According to the Ministry of Employment and Labor, 151 of the 275 companies run by the nation’s top 15 conglomerates - including Samsung, SK, LG, Lotte, Posco, GS and KT - have adopted the system.
Samsung Electronics decided to implement the system last year. Now, when a worker turns 55 years old, the company begins cutting his or her salary by 10 percent every year until retirement, at age 60.
In other words, by the time the worker leaves the company, he or she will be making half of what they made at age 55.
LG Group applied the peak wage system to electronics affiliates, including LG Electronics, LG Display and LG Chem, in 2007. It agreed to cut salaries by 10 percent every year from age 55 until retirement, at age 58.
BY KWON SANG-SOO [firstname.lastname@example.org]