Performance-based wage for ‘ordinary’ workers

The government will expand a performance-based salary system to public institutions this year.

The Ministry of Strategy and Finance announced on Thursday that the system, which applies to executives, will now also cover ordinary employees at state-run institutions.

The performance-based system was introduced in 2010 for executive-level employees at public institutions amid mounting criticism that lack of competition was undermining competitiveness at public institutions.

According to the announcement, 30 public institutions will adopt the system in the first half of this year, while 85 quasi-government agencies will follow suit by the end of the year.

At such institutions, employees are classified by five grades based on seniority. Grade 1 and 2 levels are executives.

The Finance Ministry said public institutions will start paying employees in level 3 and 4 based on their work performance.

As a result, about 70 percent of all public institutions will be subject to the salary system, up from the current 7 percent, the ministry said.

The average difference in pay increases between salaries of those who perform well and those who don’t will be 3 percentage points, expanded from the current 2 percentage points. Details of the wage increase percentage will be negotiated between labor and management at each institution.

For level 3 employees, incentives will be 20 to 30 percent of their annual salaries. The incentives for best-performers will be twice as much as those for bad performers.

For level 4, performance evaluations will affect their salaries differently every year. Those who get a bad evaluation in single year will get lower incentives than better-performed colleagues, but past evaluations will not affect their incentives the following year. The incentives will be 15 to 20 percent of their annual salaries.

“If the system is expanded, some best-performing juniors can make more than 10 million won than their senior colleagues,” said an official at the Finance Ministry.

The ministry has also come up with measures to improve the fairness of the performance evaluation system. The ministry ordered institutions to set guidelines and rules regarding evaluation.

“Dearth of internal competition and the seniority-based wage system haven’t been able to motivate employees at public institutions,” said Yoo Il-ho, deputy prime minister for economy and finance minister at a meeting of the Public Institution Operation Committee at the Seoul Government Complex.

The Federation of Korean Trade Unions’ public sector held a separate press conference, demanding the government ditch the decision.

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]