Distressed by their aging manpower and stagnant personnel structure, banks are increasingly adopting the “peak wage” system, but its range and effects remain limited.
Under this system, companies pay senior employees reduced salaries after they peak at a certain age, generally between 55 and 60, in return for extending their retirement age by a few years.
NH Financial Group, the nation’s agricultural cooperative-affiliated banking group, decided last week to adopt the peak wage system starting from next year, officials said.
Employees aged 57 or above will henceforth have to choose either to retire voluntarily or to receive a gradually decreasing salary ― phasing out from 65 percent to 35 percent, down 10 percent every year ― until the retirement age of 60.
It will be applied to all affiliates of the group, including the agricultural cooperative NongHyup.
NH Investment & Securities will be excluded as it has been applying the system since 2013, back when it was Woori Investment & Securities.
NH thus became the 18th financial operator here to adopt the peak wage system, following KB Kookmin Bank, Woori Bank, Hana Bank, Korea Exchange Bank and Industrial Bank of Korea. Shinhan Bank, the nation’s No. 1 bank in assets and profits, is as yet undecided and currently discussing the issue with its labor union.
This move follows NH Financial Group’s decision to raise the legal retirement age to 60 from 58, starting from next year.
The banking group, with its large-scale and relatively aged employee spread, will suffer directly from the increase in retirement age. The flagship NongHyup Bank currently has over 1,000 manager-level employees.
Also, the agriculture cooperative-based bank is likely to have received pressure to actively abide by the government’s labor policy reform, industry observers noted.
Such a decision coming from one of the nation’s largest banking group is expected to deliver an impact on the entire industry, possibly pushing other banks to adopt the wage system.
But critics pointed out that in highly professional operations such as banks, it may have little effect as it will drive senior employees into lethargy.
“Instead of cutting the wages en bloc, banks should apply differentiated incentives, considering the work capacity and past performance of individual employees,” said a report by the Hyundai Research Institute.
Others also said that the range of adoption in the banking industry can only be limited as public financial organizations are still passive about the peak wage system.
According to the Ministry of Strategy and Finance last week, only two public institutions ― Korea Investment Corp. and Korea Southern Power Corp. ― have adopted it so far.
By Bae Hyun-jung (
tellme@heraldcorp.com)
