[Performance-Based Pay Solution] ④ "Introduction Starting with Public Enterprises and Civil Servants vs. Repeated Side Effects in the Public Sector"

Possible to receive performance bonuses for public duties?
Civil servants say "Departments with poor performance will be avoided more"
Fair and rational job and performance evaluations must be established first
Experts say "If civil servants can't change, private companies can't either"

"We must create a vibrant public service by introducing a private-sector level personnel system and bold performance-based pay." (President Yoon Suk-yeol)

"If performance-based pay expands in the public sector, who would want to work in departments that are hard to achieve results in?" (Local government grade 7 public official)

The government has set a policy to expand the introduction of performance-based pay in the public sector, sparking heated debates mainly among the public service and labor circles. While there are expectations that the full-scale introduction of performance-based pay in the public sector will not only change the rigid and inefficient organizational culture but also serve as a driving force to expand performance-based pay to private companies, concerns are also raised that negative effects such as a stronger 'ranking' culture within the civil service will increase. Experts emphasize that while reducing the seniority-based pay system in the public sector is necessary, sufficient discussion and prior preparation are essential to minimize the anticipated confusion.

Performing public duties... Is performance-based pay feasible?

The biggest issue is that it is difficult to clearly evaluate jobs and performance in the public sector. Most performance-based pay evaluation tools used by advanced countries and global companies focus on profit generation, but the public service aims to pursue public interest rather than private gain. Indicators that are relatively easy to measure, such as "how much money was earned," are easy to link to wage systems, but it is difficult to evaluate jobs and performance for tasks with a public value nature.

The rotation system, a characteristic of the public service, is also a major obstacle to the performance-based pay system. Civil servants and public institution employees, in principle, do not work in one job for a long time. This is to develop a broad perspective necessary for handling public duties and to prevent collusion with stakeholders. If a performance-based pay system is implemented, wage differences will arise depending on the assigned tasks, so in Korea’s situation where employees are not initially hired by job and tasks keep changing, there are many concerns that employee dissatisfaction will increase.

Another problem is that if performance-based pay is introduced without a significant change in total wage amounts, many employees may end up with wage cuts. A union official from a public institution said, "I want to tell policy makers to try persuading the employees in their own organizations to implement the job-based pay system," and questioned, "If many employees’ wages decrease when performance-based pay is strengthened, which union would accept and agree to that?"

For these reasons, most attempts to introduce performance-based pay in the public sector under past administrations have ended in failure. President Kim Dae-jung promoted the "five major reforms in personnel policy," including introducing performance-based pay for civil servants in the 2001 New Year’s work report, but it did not achieve significant results. The Lee Myung-bak administration planned to modernize the public sector from the transition team stage but faced opposition and failed to produce results, and discussions disappeared after the 2008 "mad cow disease candlelight protests." The Park Geun-hye and Moon Jae-in administrations also attempted to reform the wage system but ended inconclusively due to union opposition.

"Who dreams of becoming a civil servant these days?"... Fix wages and organizational culture first

However, many opinions hold that comprehensive structural reform, including the wage system, is necessary to change Korea’s rigid and inefficient public service culture. This is also a prerequisite for creating the "agile and flexible government" that President Yoon Suk-yeol pursues. President Yoon recently emphasized at a Cabinet meeting, "If the mindset of public officials does not change, it will be difficult to survive in the economic war," and "We must boldly break the existing customs and regulatory frameworks." The government’s consideration of abolishing salary caps in some ministries such as the Space Aviation Agency and significantly expanding the performance pay portion of civil servant wages is in line with this context.

While reforming the public sector wage system to boost economic vitality is important, the growing dissatisfaction among young civil servants suffering from low pay under the existing seniority-based system is also a problem. There is considerable concern inside and outside government ministries that outstanding talents, especially from the MZ generation (Millennials + Generation Z), are distancing themselves from public service. For example, the monthly salary of a grade 9 entry-level civil servant, including position allowances, is only about 2 million won this year, and many experience overtime or work-related stress depending on the job, which increases feelings of deprivation.

Recently, voices have gradually emerged among frontline civil servants calling for strengthening the competitive system by moving away from the seniority-based system. A senior official at a central government ministry said, "High-ranking officials subject to the performance-based annual salary system have significant salary differences depending on evaluations, and it seems that the workload has definitely increased compared to the past," adding, "It is true that civil servants now need wage differentiation based on competition." According to the Ministry of Personnel Management, the performance- and job-based annual salary system currently applies to civil servants at grade 5 and above, political appointees, and fixed-term officials, but those at grade 6 and below have maintained a seniority-based wage system for decades.

If civil servants cannot change, spreading performance-based pay is 'impossible'

A representative from a global management consulting firm said, "When working on projects with public institutions, I often feel that the work culture is outdated," and added, "There is a saying that if the Ministry of the Interior and Safety’s work were given to Samsung, it could be done at one-third the current cost, and in terms of efficiency and capability, that is not an exaggeration." The representative explained, "From the perspective of tightening work intensity in the public service, even if not strictly job-based pay, it is necessary to adopt a stronger performance pay or annual salary system."

In particular, reforming the wage system of public institutions and civil servants is also evaluated as a meaningful starting point for expanding performance-based pay in private companies. Kim Moon-soo, chairman of the Economic, Social and Labor Council, recently said in an interview with Asia Economy, "Solving the problem of seniority-based wages is very complicated, so it should be tried first with civil servants and public institutions," and pointed out, "It is not right to tell private companies to switch to performance-based pay when civil servants themselves have not adopted it."

"Without connections, you'll end up in undesirable departments"... Need to gain civil servants' trust

However, to introduce a wage system based on job and performance for civil servants and public institutions, issues such as personnel arbitrariness, solicitation culture, and ranking practices in the public service must be resolved first. Concerns about performance-based pay are greater in local government positions, where the influence of local government heads is strong and organizational culture is more severe. A 10-year veteran local government grade 7 civil servant said, "If performance-based pay is introduced for civil servants, departments like General Affairs, Personnel, and Planning, which usually receive the best ratings, will be monopolized by employees with connections to higher-ups, and the rest will be left in undesirable departments," adding, "Employees in departments with poor performance and low wages will hardly work hard, and ultimately only the public will suffer."

For example, the Disaster Department, considered an undesirable department in local governments, often requires overnight shifts three to four times a month and must respond on-site to wildfires or disasters, making the workload intense but performance difficult to achieve. It is explained that to establish performance-based pay, the personnel and organizational systems must be innovated so that such departments can receive fair job and performance evaluations. Efforts are also needed to ensure that general administrative departments, which cannot quantify performance like business departments, do not suffer disadvantages and that the criteria for the portion of wages based on job and performance are clearly set to avoid "nominal job-based pay." Professor Lee Sang-min of Hanyang University’s Business Administration Department said, "It is very important to show exemplary changes in the wage system starting with civil servants and public institutions."