Government Approves Worker Compensation Plan

Starting in 2006, the government will extend financial assistance to businesses that adopt the “Wage Peak” system.

The governmental assistance program is intended to encourage the introduction of the Wage Peak system, which is expected to contribute to job security. The Ministry of Planning and Budget announced on October 2 that the government will withdraw 10.7 billion won from the employment insurance fund to pay for the program.

Of the 10.7 billion won, 8.9 billion will go to workers whose salaries are scheduled to peak at a certain age in order to make up for their lost incomes. The rest will be used to pay for consulting costs of the companies, which will be preparing for the introduction of the Wage Peak system.

As to how the money drawn from the employment insurance fund will be spent, there are no details available. But the Ministry of Labor will soon finalize the schedule and announce the details of the assistance program.

The ministry is favorably looking at an option under which financial aid is given directly to the workers who suffer losses of income, not to the businesses.

In Korea, the Wage Peak system was first introduced by the Korea Credit Guarantee Fund in July 2003, with a growing number of financial institutions and state-owned corporations following suit.

Those financial institutions include the Export-Import Bank of Korea, the Korea Development Bank, and Woori Bank. About 20 manufacturers, such as Taihan Electric Wire and DSME, are also part of the Wage Peak scheme.

Joong-Hyun Park sanjuck@donga.com