Bank union votes for a strike

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Bank union votes for a strike

Ahead of a scheduled announcement by the Korea Federation of Banks (KFB) this week, the Korean Financial Industry Union (KFIU) voted to strike in September to protest the introduction of a government-promoted performance-based salary system.

The union supported the strike with 95.7 percent of the vote, held Tuesday afternoon with a turnout of 87 percent.

“Introduction of the performance-based salary system is designed to oust bad performers,” said the KFIU in a statement. “Despite the vacation season, 82,633 members of the union voted to protest the plan, which proves a consensus on the issue.”

If the union achieves an industry-level strike in September, it will be the first in two years.

The KFB is going to unveil guidelines for commercial banks to adopt the new salary system, which will widen the difference between salaries of the top performers and worst performers to 40 percent.

According to the financial industry, the KFB commissioned a consulting firm to design the guidelines, whose main idea is to apply a performance-based system to all employees, including entry-level ones.

Most commercial banks have adopted the performance-based system in response to a government initiative to reform the financial industry, but the adoption was limited to executives and branch managers. The remaining employees are still subject to a seniority-based salary system that does not take differences of performance into account.

Due to a long-held tradition of seniority being considered the most important factor in compensation, the financial industry has been under fire for lax management, inefficiency and unfairly high salaries. President Park Geun-hye and Financial Services Commission Chairman Yim Jong-yong branded such traditions as a “refusal to change.”

Reportedly, the KFB guidelines include making a 30 percent difference in salaries of the best and worst performers at the manager level and a 20 percent difference at the ordinary employee level at the start of the system. The percentages will be raised to 40 percent at a maximum, according to industry insiders.

That is a tougher standard than recommended by the government earlier this year.

The FSC established performance-based guidelines for nine state-run financial institutions in February, hoping they would lead the use of the system in the industry. Within each employment level, the best-performing employee will get a 20 to 30 percent higher wage annually than the worst performing employee, according to the FSC plan.

“The guidelines are for private financial companies that seek profit,” said an official at KFB. “The purpose is to adopt a tougher performance-based system than public institutions.”

However, the official said the guidelines do not clarify when the banks need to raise the percentage to 40 percent.

The guidelines also say that evaluation of individual employees will account for 20 percent or more in calculating compensations. Currently, performances of teams to which an individual belongs are considered when estimating incentives.

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