Nearly all banks will use peak wage system

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Nearly all banks will use peak wage system

Almost all banks in Korea will have implemented the peak wage system by early next year as they try to contribute to the government’s bid to create more jobs.

The news will be welcome to young job seekers who want to work in finance, as positions at state-run financial institutions are among the most coveted. Applicants are attracted by the lengthy tenure, job security and high salaries, according to data released Wednesday.

Citibank Korea said it has reached an agreement with its union to implement the peak wage system from Jan. 1, 2016. The system will be applied to employees aged 57 and above, where they will be paid 80 percent, 70 percent and 60 percent of their annual salary over the next three years in exchange for their lengthier tenure.

Other welfare benefits will remain the same, according to the banks.

“Details, including what the employees falling under this category will do, will be decided by the end of this year,” a Citibank official said.

Citibank’s union and management have also reached an agreement to increase permanent workers’ wages by 2 percent and those of contract workers by 4 percent.

With Citi’s decision, almost all banks - with the exception of Standard Chartered and a few smaller regional banks - will have implemented the peak wage system next year.

Korean banks were some of the earliest adopters of the peak wage system, with Woori Bank having embraced it in 2005. KEB Hana Bank (then Hana Bank) and Kookmin Bank adopted it in 2006 and 2008, respectively.

As the job market has become increasingly tight amid mounting labor reform pressure, state-run financial institutions have become one of the most desired workplaces for financial job seekers, according to an audit report by lawmaker Kim Sang-min on Wednesday.

High paychecks and long tenure, a rare combination in Korea today, have given state financial institutions the nickname “a workplace chosen by the gods” Competition for a position with the Korea Deposit Insurance Corporation, for instance, was around 0.4 percent, meaning 4 out of 1000 applicants managed to land a job there. Nearly 5,300 candidates applied for 20 new positions at the firm last year.

Competition for other public financial institutions was similarly high, with admission rates to the Korea Securities Depository (KSD) being 0.56 percent and Korea Housing Finance 0.73 percent.

Korea Development Bank, whose admission rate was higher, at 2.54 percent, offered the highest entry-level annual pay among the studied group, at 44 million won. The Industrial Bank of Korea, with an admission rate of 0.94 percent, followed with an annual salary of 43 million.

The institution with the longest average tenure was the Financial Supervisory Service with 17.2 years, followed by KSD (17 years).

The institution with the shortest average tenure was the Korea Deposit Insurance Corporation, at 10.7 years.

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