Feb. 14, 2017

A survey of companies which reformed their wage systems found that workers and employers both expressed high satisfaction with their wage system reform. The proportion of respondents saying that their wage system reform brought a positive effect in improving job satisfaction, company atmosphere, growth and employment was far higher than the proportion saying that it did not.

The Ministry of Employment and Labor (MOEL) commissioned the Center for Wage and Job Innovation of the Korea Labor Institute to conduct a survey of 138 companies (a total of 276 people consisting of 138 personnel managers and 138 employee representatives) which reformed their wage systems between 2014 and 2016 to find out their levels of satisfaction with such reform and released the results.

* survey agency: Hyundai Research Institute, survey period: Dec. 6 ~ 20, 2016

According to the results of the survey, 70.3% of employer-side respondents and 58.7% of employee-side respondents said that they were satisfied with the reform of their wage systems. These proportions were much higher than the proportions indicating dissatisfaction (1.4% of employer-side respondents and 8.0% of employee-side respondents).

Both groups of respondents also expressed a favorable view of changes brought to their companies by wage system reform.

More than 50% of each group responded that employees' job satisfaction, affection and loyalty, employee morale, company atmosphere, company fairness, employee cooperation and bonding, etc., improved while only a very small proportion said that they deteriorated. 

The proportions of employer-side respondents and employee-side respondents saying that business indicators, such as company sales, production and productivity, employment and turnover rates, improved were both well above the proportions saying that they did not.

The largest proportion of respondents described 'consensus-building among workers' (18.1% of employee-side respondents and 19.6% of employer-side respondents) and 'agreement between labor and management' (11.6% of employee-side respondents and 20.3% of employer-side respondents) as the most difficult thing they did while reforming their wage systems. When asked what they want from the government or employers' and workers' organizations, the largest proportion cited 'consulting services', which was followed by 'information on wage levels in industries of the same kind' and 'PR efforts'.

The results of the survey show that on the whole, wage system reform improves job satisfaction, wage fairness and organizational culture and has the effect of decreasing turnover rates, increasing sales and productivity and creating jobs.

It should be especially noted that contrary to some people's concern that companies may use wage system reform as a means of cutting wages, the proportion reporting a rise in total payroll costs was overwhelmingly higher than the proportion reporting a fall in those costs.

* Of all respondents, 49.3%, 6.5% and 44.2% reported a rise, a fall and no change in total payroll costs, respectively. (Of those reporting no change, 19.7%, 1.6% and 78.7% expected a rise, a fall and no change in total payroll costs, respectively.)

Moreover, the fact that building consensus among workers and reaching labor-management agreement was the most difficult part of their reform process suggests that the process of reforming wage systems was not always smooth.

The survey demonstrates that if a company reforms its wage system based on consensus between labor and management despite a short-term increase in payroll costs and difficulties in labor-management consultation, such reform benefits both labor and management.

* At the time of the survey, respondents indicated a high level of satisfaction on most  items, including organizational culture and business indicators. Even among those who reported no change, many said that their level of satisfaction would increase.

"With the arrival of the era of retirement at age 60 or above and the progress of the fourth industrial revolution, wage system reform has become an essential task in our time, which must be done to achieve win-win outcomes for both employers and workers" said Jeong Ji-won, the Director-General of the Labor-Management Cooperation Policy Bureau.

"The government will create an atmosphere that enables employers and workers to reform their wage systems autonomously and will support such reform efforts as best it can, for example by reinforcing wage information infrastructure and providing consulting services."