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Korea to limit pay rises for wage peak system rebels

The government plans to halve the pay hike rate of public corporations and institutions that fail to introduce the wage peak system by the end of this year, officials said Thursday.

Under the plan, if the pay increases for both public servants and quasi-public servants is set at 3.4 percent next year, the rate for employees of the agencies delaying or declining to adopt the wage peak system would stay at 1.7 percent.

The officials said the Steering Committee on Public Institution will decide the exact reduction ratio at its meeting on Sept. 16.

Senior officials including Deputy Prime Minister and Finance Minister Choi Kyung-hwan have pressed the state-run agencies and public corporations to introduce the peak wage system over the past few months as part of the government’s labor reform.

Under the system, the retirement age has been extended to 60 from the current range of 53 to 58, but the pay for workers approaching that age is reduced by about 10 percent over their last several years at work.

Officials from the Finance Ministry and the Ministry of Employment and Labor reiterated it would help widen employment opportunities for young job seekers and accelerate the overhaul of the public sector. The scheme on curbing pay increases is designed to increase pressure on them.

After the National Assembly passed a bill in 2013 that would make it mandatory for the public sector, including quasi-government agencies, to extend the retirement age to 60 or above from 2016, 31 percent, or 101 of the total 316 agencies and public firms had reportedly completed the procedures to adopt the wage peak system as of Sept. 9.

For a faster introduction, the government recently announced that it would offer a bonus of 3 points to those adopting it when the government conducts a regular management assessment on the public sector.

Minister Choi has instructed the remaining agencies (about 69 percent) to follow suit. He stressed that “concessions are needed to settle down the social woes from the climbing jobless rate among the youth.”

By Kim Yon-se (