Labor Ministry Proposes Legislation for 'Public Institution Labor Director System'... Job-Based Pay System Faces 'Speed Adjustment'

Public Institution Committee under the Tripartite Commission, Social Consensus Achieved
Acceleration of 'Public Institution Operation Act' Amendment... Early Introduction of Union-Recommended Director System
Wage System Reform Based on Labor-Management Agreement... Autonomous and Gradual Implementation

Economic, Social and Labor Council

[Asia Economy Reporter Kim Bo-kyung] The government and labor unions have agreed to introduce a labor director system in public institutions. Until the related laws are amended, they will strive to introduce a union-recommended director system, appointing individuals recommended by labor unions as non-standing directors. The reform of the wage system centered on the job-based pay system will be autonomously promoted through labor-management agreements.

The Public Institution Committee under the Presidential Economic and Labor Commission (Chairman Lee Byung-hoon) announced on the 25th that it had reached an "agreement for the sustainable development of public institutions" after a year of discussions.

The Public Institution Committee is composed of Professor Lee Byung-hoon of Chung-Ang University as chairman, three worker members affiliated with the Federation of Korean Trade Unions, three government members from the Ministry of Economy and Finance, Ministry of the Interior and Safety, and Ministry of Employment and Labor, and three public interest members. Since its launch in November last year, it has regularly promoted social dialogue.

According to the agreement, first, it recommended that the National Assembly promptly begin discussions on amending the law to introduce the labor director system. The labor director system means that employee representatives participate in the board of directors and exercise voting rights.

For the labor director system to be introduced in the public sector, the "Public Institution Management Act" must be amended. This agreement can be seen as a mutual recognition by labor and government of the necessity to introduce the labor director system in government-affiliated public institutions. The introduction of the labor director system was also a campaign pledge of President Moon Jae-in.

The agreement states, "Before the introduction of the labor director system, labor and management in public institutions shall allow employee representatives to observe board meetings and express opinions with the chairman's permission according to autonomous agreements," and "If the labor union recommends suitable individuals, efforts will be made to appoint them as non-standing directors through existing legal procedures."

This opened the way to introduce the union-recommended director system until the labor director system is formally introduced through legal amendments.

Additionally, labor and government agreed to autonomously and gradually promote the reform of the wage system in public institutions centered on the job-based pay system.

The agreement states, "Efforts will be made to reform the wage system so that objective job value is reflected in wages," and "The reform of the job-centered wage system will be autonomously and gradually promoted through labor-management agreements, reflecting the characteristics of each institution rather than through uniform or unilateral methods."

The government has been promoting the introduction of a job-based pay system for several years, which determines wages based on job characteristics and value such as work intensity, difficulty, and level of responsibility. This is because the existing seniority-based step system caused various side effects such as wage disparities and labor rigidity.

However, there are concerns that leaving the introduction of the job-based pay system, a long-standing issue in public institutions, to labor-management agreements may further delay the reform of the wage system.

Based on this agreement, labor and government will continue follow-up discussions to ensure the successful reform of the wage system in public institutions. They also agreed to prepare improvement measures for the wage peak system and to make efforts to utilize wage peak personnel in activities supporting small and medium-sized enterprises.

Going forward, labor and government plan to proceed with agenda-setting processes such as research groups aiming for the launch of the "2nd Public Institution Committee" in April next year.