Lotte Department Store to Lead Retail Sector with First Job-Based Pay System... KCTU Files Complaint with Labor Ministry over "Undemocratic Process"

Introduction of HR System Based on Job Expertise and Job Difficulty
Employee Consent Process Underway; Implementation Planned for Second Half if Majority Approves
Union Criticizes "Open Ballot Requiring Employee ID Entry"
Claims Company Pol

Lotte Department Store will be the first in the retail division of the group to introduce a job-based pay system. This move comes in response to Chairman Shin Dongbin's directive to strengthen employees' job expertise and establish a performance-oriented HR system, with the aim of providing greater rewards for roles that demonstrate strong performance and expertise.

If more than half of the employees agree, the system is expected to be implemented within this year. However, the labor union has raised procedural concerns, arguing that the method for gathering employee opinions makes it difficult for members to express themselves freely.

According to industry sources on August 27, Lotte Department Store has been collecting consent from executives and employees since August 12 for the implementation of the new human resources (HR) system, called the "Expertise Growth-Oriented HR System," and other related changes. As of the end of June this year, if more than half of the 3,047 employees agree to the new system, it will be put into effect within this year.

Lotte Department Store Main Branch. Provided by Lotte Department Store

The Expertise Growth-Oriented HR System being promoted by Lotte Department Store is a system in which promotions and evaluations are based on expertise, regardless of years of service or rank. The company explained that the core of the system is to establish customized training programs tailored to the characteristics of each job, thereby enhancing motivation and nurturing experts in each field.

Specifically, the existing grade system, which applied years of service and promotion periods, will be abolished and replaced with the "GL (Growth Level)" system based on job expertise. GL is divided into five levels, ranging from GL1, which represents entry-level employees capable of performing work with coaching, to GL5, which signifies experts with the highest level of knowledge and experience in the industry. In addition, a four-level JL (Job Level) system will be introduced, reflecting the difficulty and importance of each job. Each year, individual employee evaluations will be combined with the newly introduced GL and JL grades to determine differentiated salary increase rates and caps. As a result, even employees with the same performance evaluation may receive different compensation depending on the grade and expertise of their role.

Since last year, Lotte has been sequentially introducing job-based HR systems to its group companies in order to reform its existing seniority-based salary and HR structures. Lotte Biologics, Daehong Communications, and Lotte Innovate have already introduced job-based pay systems under these standards, and Lotte Chemical's Advanced Materials Division is also operating such a system. Among the food businesses, Lotte Wellfood recently completed the employee consent process for the new system, with 56.6% of its 2,073 employees agreeing to the change last month.

If the consent process is approved at Lotte Department Store, which holds significant symbolic value within the group, it is expected that the job-based pay system will quickly spread throughout the retail sector. However, the Lotte Department Store branch of the Service General Union under the Korean Confederation of Trade Unions is protesting, claiming that the process of seeking employee consent for the Expertise Growth-Oriented HR System is undemocratic. The company explained the HR system changes through its internal system and required each employee to select whether they agreed or disagreed. The union argues that the named voting method effectively limits employees' choices, making it difficult for them to vote according to their true intentions.

A union representative stated, "To participate in the consent process, employees must enter their employee number and name and select either 'agree' or 'disagree.' This makes it a de facto public vote, as the company can see who agreed or opposed. Regardless of the expected benefits or specific issues of the new system, from the employees' perspective, the process is unilateral and coercive, forcing them to accept company policy out of fear of disadvantage." The representative added, "A new system could be created to fully guarantee secrecy. Employees' opinions should be properly reflected through a secret and anonymous vote."

A Lotte Department Store official responded, "We held briefing sessions on the new HR system and provided an environment where employees could voluntarily decide to agree or disagree according to their own will. The named consent process is also being conducted in accordance with the proper procedures for amending employment rules." The official emphasized, "Employee personal information is checked only for the Ministry of Employment and Labor's employment rule reporting process. Voting details and identities are not disclosed, and there are no disadvantages for employees." However, it is reported that some employees have expressed concerns to the union about whether there would be any issues if they chose to oppose the change.

In this regard, the Lotte Department Store union plans to file a complaint with the Ministry of Employment and Labor, claiming procedural flaws in the consent process, regardless of the outcome of the vote, which concludes today.