Salary transparency to be legislated by gov’t

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Salary transparency to be legislated by gov’t

The government wants corporations to make public their salary structures to discourage underpayment of women and contract workers.

The so-called “salary distribution disclosure act” was a campaign pledge by President Moon Jae-in and the ruling Democratic Party during last April’s general election.

Kim Young-joo, nominated as Minister of Employment and Labor, said during a confirmation hearing last Friday that she would go ahead with the introduction of the act. Sources in the government say related departments are preparing the legislation.

Under the act, companies will have to report to the Ministry of Employment and Labor their salary structures, including the gap between male and female workers and salaried and contract workers. The Labor Ministry will publish the information.

The government claims the act is aimed at helping “laborers raise their wage negotiation power.”

“Salary secrecy is blocking average salary hikes,” said Woo Seok-hoon, a liberal economist and guest professor at Sungkonghoe University, who is a major force behind Moon’s economic policies. “We need to make the procedures of salary level decisions more transparent by opening to the public each laborer’s salary.” Woo gained fame after his book “880,000 Won Generation” became a best seller.

To drive economic growth through rises in incomes - the main premise of Moon’s economic policies - unions should gain an upper hand in wage negotiations with managements, according to Moon’s policymakers. During the general election campaign last year, his party vowed to launch the new salary disclosure system for companies with 300 or more employees.

When the act comes into force, companies will be forced to reduce gaps, the party claimed.

The Korean government has apparently been inspired by Germany. On July 6, the labor ministry’s website featured a posting with the headline “Germany’s pay structure transparency act, which makes possible discrimination-free, equal salary.”

On July 6, the German Parliament implemented the Act to Promote Transparency of Pay Structures, under which companies with more than 200 employees may face claims for information about the average monthly gross salary of at least six colleagues of the other gender who perform the same work or work of equal value. The main goal of the act is equity between men and women workers.

But some analysts warn of side effects. Government intervention in the salary decision process could infringe companies’ management rights.

“The disclosures could further ignite conflict between the management and labor union,” said Kwon Soon-won, a professor of business administration at Sookmyung Women’s University. “The government is advised to first consider closing the wage gaps with existing systems such as incentive pay.”

If there is no difference in salary between high achievers and low achievers, workers may not strive to improve productivity. Workers with powerful unions could be the biggest beneficiaries of the government policy, leading to larger salary discrepancy among companies.

“The government is forcing open the Pandora’s box of the human resources system,” said an H.R. manager at a large company. “Making it mandatory for companies to reveal their management secrets and putting companies on public trial will only deal a blow to job creation.”

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