Big Companies to Expand Annual Salary System Next Year

Business circles are drawing up the belt-tightening business plans, such as reducing wasting expenses, for next year in preparation for the delayed economic stagnation.

The majority of big companies plan to expand the annual salary system to compensate competent workers, while reducing the total amount of labor costs or maintaining the existing level.

- `Zero base` budget = Companies that reexamine the expenditure of the general expenses from the beginning are increasing in accordance of the trend that cuts the equipment investment sharply for next year. `Zero base` budget, which was employed to reduce the expenses, is revived in four years since the foreign currency exchange crisis in 1997.

The LG Electronics decided to reduce various expenses, such as labor costs, management costs, and advertising costs, by 20 percent by reexamining them from the starting point.

The SK also ordered its affiliated companies to draw up the new `zero base` budget in terms of reducing unnecessary expenditures.

The Korean Air, which is having difficulties due to the decrease of passengers, is encouraging employees to use their vacation within this year by checking the remaining vacation days every week by divisions in order to reduce the monthly-annual allowance.

Samsung and the LG`s affiliated companies are trying to reduce the monthly-annual allowance by implementing the Saturday-off system.

- Expansion of the annual salary system = Samsung plans to expand the annual salary system, which is currently applied to the director of the division and the higher ranks, to the lower ranking employees.

Samsung`s structural adjustment headquarters ordered such expansion of the annual salary system in its investment guidance for next year, and notified to freeze the personal costs at the same level of this year based on the total amount.

The LG Electronics and its affiliated companies are considering expanding the annual salary system, which is currently applied to the director of the division and the higher ranks, to other employees.

parkwj@donga.com