87% Adopting the Annual Salary System, Ratio of Occasional Hiring 47%

The base of the Korean major companies’ personnel management system experienced a fundamental change from the Japanese style ‘seniority system’ to the American style ‘productivity’ with the foreign exchange crisis as a momentum. Especially, there are 87% of the companies that do the annual salary system, which is the symbol of the personnel management system that is based on the productivity and capability, and 73% of them started that system after the foreign exchange crisis. And most of the major companies (97%) exercise the outside director system to raise their clearness.

This is the result of the analysis of the survey, ‘the change of the personnel management system of the Korean companies before and after the foreign exchange crisis,’ which took the top 100 Korean companies based on recent sales total as the subject and performed by the Dong-Ah Ilbo economy division and the Korea Labor Research Center. For this survey, 71 companies out of the top 100 companies responded. There were some partial surveys about companies’ personnel management system change; however, this was the first time to research and analyze extensively like this.

The result showed that the lump salary system by the seniority in major Korean companies had already collapsed, and there was a serious change in every personnel management system such as employment, compensation, and position system.

The annual salary system by the productivity and capability was being applied to 97% of the office management staff, and 80% of the research, development, and technical staff was also receiving their salary according to the annual salary system.

The hiring system has also been changed, so the ratio of regular hiring and occasional hiring, which was 7 to 3 in 1997, right before the foreign exchange crisis, changed to almost 5 to 5 recently. The average of total ratio of the occasional hiring is 47%, and the bigger companies such as Samsung and LG are closed to 70%.

One’s alma mater and GPA were one of the most important qualifications for the new employees, but interviews and major became more important after the foreign exchange crisis.

The Head of the Korean Labor Research Center said, “It showed that the major Korean companies adapted the personnel management system closed to the global standard earlier than I thought after the foreign exchange crisis,” and “this tendency will be accelerated.”

Kwang-Hyun Kim kkh@donga.com