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11 business groups to apply wage peak system next year

Major conglomerates, including Samsung, LG and Lotte, have reached a consensus with their respective unions on adopting the wake peak system for all their business units next year, according to a survey by a major business lobby on Tuesday.

According to the Federation of Korean Industries, 11 of the 21 major business groups responded that they have reached a deal with unionized workers to introduce the wage peak system, while the remaining -- including Hyundai Motor and SK -- are still negotiating.

Under this system initiated by the government and adopted by many companies, the retirement age is extended to 60 from the current range of 53 to 58 and the paycheck for elderly workers slashed by about 10 percent over their last several years at work.

Samsung Group, which has already partially adopted the system, plans to expand it to all business affiliates. The nation’s biggest conglomerate operates 17 listed firms whose equities are publicly traded and 56 nonlisted firms in the local market. LG Group, which has de facto implemented the scheme in all affiliates, is fine-tuning details involving the extension of the retirement age in its electronics unit.

All Lotte units will join from 2016, as Lotte Confectionary and Lotte Home Shopping are already implementing the system.

SK Group said the system, which is underway at units such as SK hynix and SK Telecom, will be introduced in other affiliates in the coming months.

Hyundai Motor Group is mapping out clauses with its union for adoption at units like Hyundai Motor, Kia Motors, Hyundai Mobis, Hyundai Glovis, Hyundai Engineering & Construction, Hyundai Steel, HMC Investment Securities and Innocean Worldwide.

Economic policymakers have continued to ask the conglomerates as well as public enterprises to implement the system. They stress that concessions are needed to overcome the rising youth unemployment.

The government is scheduled to offer an annual subsidy of 10.8 million won ($9,540) per new employee for two years to companies that increase the number of young workers via the wage peak scheme.

Further, to promote active job creation in the private sector, the Finance Ministry plans to offer extra tax benefits to enterprises that hire more young job seekers, as compared to the previous year.

The current tax deduction benefit -- when companies convert nonregular jobs to regular positions -- worth 2 million won per employee will be extended from the end of 2015 through 2017.

By Kim Yon-se (
Korea Herald Youtube