Wage Peak System to be Introduced

The government plans to compensate part of workers’ salary losses from a wage peak system to be introduced next year.

The period during which it financially supports corporations that employ those who retired due to age limits is expected to be prolonged from the current six months to about three years.

The ministries of Finance, Economy and Labor said on January 6 that the government will confirm its plan for the job security for the aged in the first quarter of this year (January through March) and implement it starting from next year after revising related laws.

A government official explained, “Though specific plans are yet to be confirmed, we are reviewing ways to provide ‘wage coordination aid’ (its tentative name) for workers to compensate their losses from the wage peak system by using an employment insurance fund.”

Under the new system, the government aims to limit the percent of compensation under 50 percent of wage cuts, and its support period will last about three years after the adoption of the system to forestall potential disputes over moral hazards.

For instance, it will compensate a worker 250,000 won every month for three years if the worker sees a cut in his monthly wage from three million to 2.5 million won under the influence of a wage peak system adopted by his company.

Chi-Young Shin higgledy@donga.com