Commercial banks mull merit-based pay amid low growth

Korean commercial banks will consider adopting the performance-based pay system in a move to strengthen competitiveness amid low growth and low margins, a banks' lobby group said Tuesday.

"We will announce the guidelines this month to help our 17 member banks introduce the performance-linked pay system. Most banks will wait and see what the guidelines will be about before they introduce or consider introducing the system," said Lee Kyung-hee, a spokeswoman for the Korea Federation of Banks. 

The KFB has asked a consulting company to come up with the guidelines by the end of this month, she said.

Currently, executives already receive their salary based on their contributions to banks, but employees have yet to be paid according to their regular performance reviews and seniority.

Korean banks have suffered declining margins due to record low interest rates and tough competition in the nearly saturated domestic market, and faced increased calls to adopt the new wage system to streamline themselves and go overseas to find a new growth driver.

The performance-based wage system is part of the government's efforts to boost labor flexibility to create more jobs, especially for younger generations.

Some 120 public companies and institutions are in the middle of adopting the new wage program, with some of their unions protesting the move. (Yonhap)