Labor cost balloons due to seniority-based wage system in Korean public utility sector

[Photo by MK DB]

About one out of five employees at South Korea's public utility companies earned more than $75,000 a year, as jobs are secure in the public sector despite ballooning operating losses and debt.

According to a report made by Rep. Yang Kum-hee of the ruling People Power Party on Thursday, about 21.3 percent of employees at 12 state-run energy companies, including Korea Electric Power Corp (KEPCO), Korea Hydro & Nuclear Power, Korea National Oil Corp., and Korea Coal Corp, received more than 100 million won ($75,352) in salary last year. The share is up 7.2 percentage points compared to 14.1 percent in 2017.

The rise is in line with increased number of staff with long seniority. KEPCO employees with an annual salary of more than 100 million won have worked for the state power company for more than 31 years on average. The case is similar with other public companies.

Since 2017, the total number of workers at the 12 public companies grew by only 8 percent.

Many of public companies in Korea pay their employees in salary based on the years of service, rather than work performance. Such pay system has increased labor cost and widened wage gap between older and younger employees.

According to public information site of the Ministry of Economy and Finance, the number of employees at public companies increased to 449,000 in the second quarter of 2022 from 345,000 won in 2017. Payroll expense grew accordingly, rising to 30.8 trillion won in 2021 from 23.2 billion won.

The government has been encouraging public companies to adopt performance-based pay system but only 10 percent, or 35 out of total 350 public companies have done so by the end of 2021.

For more active participation, the government plans to score higher for performance-based system when evaluating management performance of public companies.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]