Companies in South Korea urged to refrain from wage hikes

Increasing wages would add to the woes of small business owners during the economic downturn, cautioned a major business lobby group.
By: | July 1, 2022
Topics: Compensation and Benefits | News | South Korea

Companies should slow wage hikes at a time when the economy is bracing from recession and inflation, said the head of South Korea’s major business lobby group. 

“Large corporations should reflect on themselves. As a result of their excessive wage increases in the war for talent, there is a widening gap between minimum-wage and high-income workers, causing a social conflict,” Sohn Kyung-shik, Chairman of Korea Enterprises Federation (KEF), a major business lobby group, told Maeil Business Newspaper.

South Korea should refrain from increasing wages next year, which would add to the woes of small business owners during the economic downturn, Sohn cautioned. 

The key issue in the country’s pay system lies in a seniority-based payment, instead of a merit-based one, he said. 

It is necessary to change the pay system, and KEF will be in close consultation with the government to make an immediate shift to a merit-based payment system, he said.

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“Establishing legal order in industrial disputes, shifting to a merit-based payment, and guaranteeing the defence right of management against workers’ union during labour disputes are among the reforms that the government should strive to achieve,” Sohn noted.