Half of major conglomerates to adopt wage peak system

About half of South Korean major conglomerates have decided to adopt a wage peak system from next year as the Seoul government pushes to reform the country's rigid labor market, a survey showed Tuesday.

Eleven conglomerates including Samsung Group, LG Group, Lotte Group and POSCO Group will embrace the new type of remuneration at all affiliated companies starting from the beginning of 2016, according to the poll of 21 large businesses conducted by the Korean Federation of Korean Industries.

Another 10 groups, including Hyundai Motor Group and SK Group, are in talks with their labor unions to introduce the system, the FKI added.

The wage peak system calls for the retirement age of workers to be pushed back, giving them greater job security. The same people benefiting from this, on the other hand, must accept lower wages just before retirement. The money saved will be used to hire new employees in a kind of work-sharing arrangement.

Samsung Group, South Korea's largest business group led by Samsung Electronics Co., will implement the novel system throughout the group next year, while LG Group, the No. 4 conglomerate, will have its electronics units lift the retirement age to 60 from 58.

All of LG Group's affiliates have already implemented the wage system.

Two affiliates of retail giant Lotte Group are running the wage peak system, with the group headquarters planning to expand it to the entire group before next year.

POSCO Group, Hanjin Group, GS Group and Hanwha also have plans to join the government-driven labor campaign.

The FKI noted that the business sector has to make more efforts to introduce the wage peak system to speed up the reform of the labor market as only half of business groups have decided to start the system from next year.

According to separate government data, out of 316 public corporations and institutions, 191, or 60.4 percent, adopted the system as of Monday.

An additional 35 organizations have plans to introduce the wage system at their upcoming board meetings later this month, raising the number to 225, or 71.2 percent, according to the data.

The Seoul government has put its top policy priority on boosting employment for young people due to the higher unemployment rate for the youth. The jobless rate of people between 15 and 29 reached 7.9 percent in September, compared with the 3.2 percent tallied for the entire country. (Yonhap)