President Park Geun-hye’s promise to address businesses’ concerns about the “ordinary wage” system has sparked a heated debate in labor, management and political circles.
During a meeting with U.S. business leaders in Washington on Wednesday, Park said the government will redress the complicated wage rule which GM chairman Daniel Akerson cited as a key barrier to investment in Korea.
The Ministry of Employment and Labor said Friday a tripartite panel of labor, management and government will begin discussion on the issue next month.
Ordinary pay includes basic salary plus position, duty and other allowances paid on a regular basis. It is used as base to calculate overtime, nighttime and holiday pay and affects the amount offered in severance packages.
Bonuses are not currently included in ordinary pay. But the Supreme Court ruled last year that quarterly paid bonuses should be counted as part of ordinary salary.
Since the ruling, labor unions have been filing a string of lawsuits against companies and are demanding that the government revise the labor law so that ordinary pay should include all types of bonuses. Businesses are opposed to the proposal, citing increased costs.
At a luncheon hosted by the U.S. Chamber of Commerce, the president said the issue was a problem for the entire Korean economy and pledged to find a solution to the matter, according to Cho Won-dong, chief secretary for economy.
The president’s remarks came after Akerson, one of the attendees of the meeting, told her that the pay scheme was one of the key obstacles to his company’s operation in Korea.
Akerson was quoted as saying that the company was planning to invest around $8 billion in Korea in the next five years. But he said the company faced two key obstacles ― the weak yen and the latest court rulings over the ordinary wage.
The presidential aide said he took the remarks to mean that GM would make the investment if the ordinary wage issue was resolved in a way favorable to the company.
The issue was also raised during Park’s breakfast meeting with Korean businesses. They said the wage scheme could become a major obstacle to businesses operating in the country and that it could spread to small companies down the road.
Companies worry that they will be burdened with higher costs if the courts rule against them in pending cases filed by labor unions.
Companies in Korea would have to pay out a combined 38 trillion won ($34.4 billion) additionally if bonus is included in the ordinary wage, undermining their export competitiveness, Cho said.
The main opposition Democratic Party said Park’s remarks were “highly inappropriate” because they were at odds with a recent court decision that classified bonuses as being part of ordinary pay.
“It was highly inappropriate for the president to object to the court’s decision as well as her attitude to satisfy a one-sided demand from the business (in order to) attract foreign investment,” said Democratic Party spokeswoman Rep. Bae Jae-jeung.
Labor groups also expressed concern, calling her remarks a “very inappropriate and dangerous idea.”
“We are concerned if her remarks gave wrong signal to businesses, judicial and administrative branch,” said the Korean Confederation of Trade Unions in a statement.
“It is Korean government’s fault that reacted immediately after GM chairman’s complaints even with the ruling that has already set a precedent that (acknowledges) bonuses as ordinary pay,” it added.
The government said it will bring the contentious issue next month to the three-way consultation panel of labor policy.
“The government will officially start to discuss whether to include bonuses in ordinary pay with the Economic and Social Development Commission next month,” the Ministry of Employment and Labor said.
By Cho Chung-un (email@example.com