[Job Performance Pay Solution] ③ Advanced Countries Have Already Settled... Need to Find a 'Korean-Style Job-Based Pay'

To Introduce Job-Based Pay, 'Fair Evaluation' Must Come First
If Employee Trust Is Not Gained, Internal Conflicts Will Only Grow
Advanced Countries Like the US, UK, and Germany Have Already Established Job-Based Pay
Korea Is Different from the Past... "Sufficient Foundation for Introduction"

Daewoong Pharmaceutical is recognized as a successful company that, in 2017, became the first in the pharmaceutical industry to reform its seniority-based wage system into a 'job-based pay' system. The existing nine-level rank system was simplified into a three-tier job system such as 'team member - team leader - head of division,' and a differentiated compensation system was established based on sales, non-sales, and performance. While shifting the wage system to focus on job and performance, an overall salary increase was also implemented to ensure that no employees experienced a pay cut. As a result, despite having a workforce of about 1,800 employees and a labor union, the wage system reform was relatively well-received.

This contrasts with many companies that have failed to reform their wage systems due to union opposition. Detailed preparatory work, such as educational support to improve employees' job skills and a rational evaluation system, also had a significant impact. A Daewoong Pharmaceutical official said, "There was some initial resistance, but we carefully coordinated to ensure no employees were disadvantaged, and communication was strengthened to secure fairness in performance and job evaluations, which gradually improved the situation." He added, "Now, many evaluations say that the job-based pay system has helped improve work efficiency."

"How can employees trust the company?"... Fair 'Job Evaluation' Must Come First

As in the case of Daewoong Pharmaceutical, one of the most important factors in introducing job-based performance pay is establishing a 'job evaluation' system that employees trust. Since job-based pay structures wages according to the tasks assigned, it is crucial to introduce a reasonable and fair job evaluation system that both labor and management can agree upon. However, South Korea has relied on seniority-based wage systems for decades, making this area virtually a 'no man's land.' This is why labor groups express concerns that if job-based performance pay is introduced, the wage system might be altered at the employer's discretion.

Among workers, there are many voices expressing skepticism about the introduction of job-based performance pay, such as "Job evaluations are ultimately done by people, so there is no guarantee of fairness," or "There is a high risk that evaluations will be influenced by academic or regional ties, ultimately benefiting only a few employees and the company." Jeong Kyung-eun, a research fellow at the Democratic Labor Research Institute, recently commented on the wage system recommendations from the Future Labor Market Research Association, stating, "The biggest problem in designing job-based pay is the controversy over the objectivity and fairness of job value evaluation." She pointed out, "How to fairly design the basic salary differences among doctors, nurses, and nursing assistants is difficult for anyone to answer."

Since applying differential wages based on jobs inevitably reflects societal prejudices about occupations, conflicts are bound to arise from the job value evaluation stage. Research fellow Jeong explained, "In theory, job-based pay evaluates the work itself, not the person, but unions and workers are very likely to perceive it as an evaluation of themselves." She added, "Even if the job value evaluation is successfully completed, greater conflicts may arise when setting wages between jobs."

United States, United Kingdom, Germany Also Use 'Job-Based Pay'... South Korea Can Too

However, experts explain that since job-based pay systems have long been established and operated in advanced countries, there are 'tools' developed through various trials and errors, and South Korea can sufficiently apply them through 'customization.' The United States introduced job-based pay in the early 20th century under the influence of Taylorism and Fordism, rapidly spreading it through World War II. Germany sets wage levels by job and skill through industry-specific labor-management consultations. Japan has introduced 'role-based pay' to complement the shortcomings of job-based pay, and currently, 74.4% of managerial positions are known to be under 'role and job-based pay.'

The core factors of job-based pay, job analysis, and evaluation methods have already been developed and applied in advanced countries such as the U.S. and Europe. Job-based pay involves a primary classification using methods like direct observation, critical incident technique, interviews, and checklists, followed by a process of evaluating job value. The International Labour Organization recommends using factors such as skill, effort, responsibility, and working conditions for evaluation. Some companies form job evaluation committees that include external experts or union representatives. Wages can be simplified into 2-3 grades depending on the job or segmented into 20-30 detailed levels.

Therefore, experts say it is difficult to create a uniform job evaluation system, but through consulting by company or industry, job-based pay systems can be customized sufficiently in South Korea. Kim Do-won, Executive Director at Deloitte Anjin Accounting Corporation, said, "In major advanced countries, wages sometimes rise according to inflation, but mostly increases are based on job and performance." He explained, "Although somewhat unfamiliar in South Korea, tools and customization for job-based pay evaluation exist and work well globally." He added, "Global companies also continuously repeat job evaluations and localize them."

[Image source=Yonhap News]

Looking at the UK Case... Clear Wage Differences by Job

In the United Kingdom, since the passage of the 'Equal Pay Act' in 1970, the principle of 'equal pay for equal work' has been established, and various forms of job-based wage systems are utilized. According to a November report by the Korea Institute of Public Administration on a 'Job Evaluation Survey of 98 UK Companies (2017),' 77.6% of companies had official job evaluation systems, with 26.3% of respondents being 'very satisfied' with the current job evaluation method, and more than half (59.2%) 'reasonably satisfied.' Only 9.2% responded that they were 'not very satisfied.'

Examining the UK National Health Service (NHS), where the British job-based pay system is well applied, the sector integrates job grades and wage structures through job evaluations. For example, simple support staff such as cleaning, catering, and facility management at medical facilities have a job weight of 0-160, with wages around ?15,500. Patient transport and pharmacy assistants (job weight 161-215) earn between ?15,400 and ?18,100; experienced nurses and pharmacists (396-465) earn ?26,500 to ?35,500; and experienced dental technicians and medical administrators (466-539) earn ?31,600 to ?41,700. Employees must demonstrate their job knowledge and skill level at the top of each range to move to the next range and increase their wages.

Although many Korean companies have introduced job-based pay systems for reasons such as talent acquisition and government policy implementation, the results have been minimal. The Korea Institute of Public Administration explained, "Various strategies are emerging to mitigate resistance from members due to the sudden introduction of job-based pay." They added, "Strategies such as mixing job-based pay with other wage systems to allow wages to vary based on factors other than job value, and gradually introducing job-based elements to increase members' adaptation, can be considered as alternatives."

Different from the Past in Korea... "Foundation for Job-Based Pay Introduction Established"

There is also an opinion that the repeated failures of Korean companies like POSCO to introduce job-based pay in the past were due to the economic and social conditions at the time not being suitable for the job-based pay system. During Korea's high-growth period, new jobs were continuously created, and frequent personnel movements due to business expansion made it difficult to establish a wage system based on jobs. Especially then, workers had high expectations for seniority-based guarantees such as retirement security and livelihood stability. However, recently, with high growth no longer possible and the concept of lifetime employment disappearing, many analyses suggest that job-based performance pay systems are more suitable.

However, the industry advises that since South Korea still has a weak job-specific evaluation system, a careful approach by industry, sector, and company size is necessary.

For example, in small and medium-sized enterprises with fewer than several dozen employees, dividing, evaluating, and continuously managing jobs is practically impossible, so it is necessary to establish an appropriate wage system through consulting. A labor sector official said, "The smaller the company, the more the wage system should not be complicated," adding, "It is necessary to simplify the job and compensation system as much as possible and significantly strengthen compensation for core jobs."

Jeong Seung-guk, a visiting professor at Korea University's Graduate School of Labor Studies, said, "Many large companies attempted to switch to job-based pay in the early 2000s but failed because, similar to Japan, tasks in Korean companies were not clearly defined, making job-based pay unsuitable." He added, "However, recently, large Korean companies have been rapidly introducing (Japanese-style) role-based pay." Professor Jeong explained, "This means that workers themselves are accepting the necessity of job-based pay." He concluded, "Although uncertainties remain, the foundation for introducing job-based pay in South Korea has been somewhat established."