[Focus] Pay system moves toward merit basis

Since the foreign exchange crisis, a growing number of enterprises are introducing an annual salary system. As a result, the wage gap is widening further even in the same ranks. It is no longer a special case, under which the gap of annual salary doubles between officials who entered the company in the same date or a subordinate receives more salary than his or her superior.

It stems from the fact that enterprises are increasingly introducing the American-style merit-based system, which places priority on business results.

The data on the evaluation of merit have been used for the decision of salary, promotion, and personnel disposition. Accordingly, the Korean-style corporate culture, which stresses seniority and a collective system, has been changing rapidly into the American-style corporate culture, which places emphasis on results.

Noting that such a phenomenon is the same as the change of the DNA of corporate culture, many management scholars say that the boom in the business circle will bring a large impact on overall Korean society. They anticipate that the vague and noncommittal dealing style in the past will fade and that the new style focusing thorough evaluation of results will take root in the future.

According to this newspaper¡¯s survey published Sunday of 50 large companies in Korea on the change in the enterprises appraisal and compensation system, 86 percent of the respondents, including Samsung Corp., LG Electronics, and SK Corp., said that they had introduced an annual salary system. About 14 percent, including Hyundai Engineering & Construction, Hyundai Merchant Marine, Kookmin Bank, and Daelim Industrial, replied that they were sticking to the wage and appraisal system based on the length of service and rank. However, 70 percent of them said that they also would employ the annual salary system within one year, indicating that almost all companies will implement the annual salary system next year.

The wage gap in the same rank also is widening. The wage gap between section chiefs at nine companies (20 percent of the total), including Samsung Electronics, Cheil Jedang, and Korea IBM, reached more than 60 percent. The comparable wage gap was 40-60 percent for seven companies (15.6 percent), including Samsung Corp., SK Telecom, and Hanwha; 20-40 percent for 11 companies (24.4 percent), including Doosan, LG EDS, and Korea Telecom; and 10-20 percent for eight companies, including Hyundai Motor, Shinsegae, and Nong-Shim.

About 66 percent of the respondents, including Cheil Jedang, Daewoo Securities, and Samsung Life replied that subordinates could receive more pay than their superiors, showing the generalization of the wage-reversion phenomenon between ranks. As the wage-reversion ratio between ranks at the companies stood at 11.47 percent, one out of 10 subordinates is known to have received more pay than his or her superiors.

In the meantime, analysts pointed out that some companies failed to make the best use of the merits of the new appraisal system, including the fairness and confidence, as they introduced the American-style merit-based system blindly without the verification procedures of the appraisal standards or an agreement with a labor union. About 61.9 percent said that they introduced the new appraisal system without the experimental appraisal period, an essential device to enhance the degree of reliance on the appraisal standards.