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69 Public Companies to Adopt Annual Salary System

Posted December. 22, 2008 06:06,   


A performance-based annual salary system will be introduced at state-run organizations as part of public sector reform.

Posts with guaranteed lifetime employment and large benefits will be eliminated, and certain state-owned enterprises such as the Korea Rural Community and Agriculture Corp. will get rid of less competitive employees.

Sixty-nine public companies, including the Korea Electric Power Corp. and the Korea Railroad Corp., will lay off a combined 19,000 employees over three to four years.

The Strategy and Finance Ministry announced these measures yesterday under the fourth plan of public sector reform.

This plan will target 69 state-run companies focuses on boosting management effectiveness by improving management systems and enhancing employee performance.

The 69 corporations must install the annual salary and peak systems, a type of job sharing program in place at certain public enterprises, and will encourage all public companies to introduce these systems in the long run.

Wages will greatly differ based on work performance and the number of executives and assistants will be slashed.

The Korea Rural Community and Agriculture Corp. and the Korea Agro-Fisheries Trade Corp. will take the lead in enhancing performance-based personnel management. Employees at the two companies will face dismissal if their work performance is assessed below average three straight times.

The Korea Electrical Safety Corp. will axe those ranked in the bottom one percentile in performance assessment.

The number of regular staff will also be greatly reduced. The expressway corporation will cut 4,500 employees at departments in charge of collecting toll fees by transferring the work to private companies. The rural community corporation will slash 5,900 workers whose workload is reduced due to changes in the agricultural environment.

The Korea Railroad Corp. will also get rid of 9,000 jobs through automated ticketing.

A decline in the number of regular staff is not tantamount to personnel restructuring, however. This is because the number of regular workers at the 69 companies is 15 percent less than that of the regular staff of state-run enterprises.

At certain public organizations, the number of workers employed is larger than the legally fixed number of officials. In this case, the government ordered these organizations to cut their workforce through attrition and voluntary resignations in phases over three to four years.

Many say this is a compromise between two conflicting policy goals: improvement of public sector efficiency and retention and creation of jobs.

In the same context, the government will spend budget saved from workforce reduction to create 10,000 internships and expand public services.

The government also plans to secure more than 10 trillion won (7.76 billion U.S. dollars) by increasing revenue by 8.5 trillion won (6.6 billion dollars) through a cut in labor costs and outlays and sell-offs of assets unrelated to key tasks of public organizations and by reducing state spending by 1.7 trillion won (1.3 billion dollars).

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