Human Rights Commission: "Wage Peak System That Cuts Salaries Without Compensation Is Discriminatory"

The National Human Rights Commission of Korea has determined that a wage peak system that reduces the salaries of older employees without providing separate compensation constitutes age-based discrimination.

Yonhap News Agency

On September 30, the commission announced that it had recommended Company A and Foundation B pay the complainants the reduced wages and prepare measures to improve the system.

Previously, two employees of Company A filed a complaint with the commission in December last year, arguing that the wage peak system, which reduced their salaries without any additional compensation after the retirement age was extended to 60, was unfair. Company A responded that the system was legitimately implemented through a collective agreement with the labor union and that discussions were underway with the union regarding supplementary measures for the wage peak system.

However, the commission found the salary reduction period for the complainants was more than double the period of the retirement age extension, and that the wage level was only about 35% of the previous amount, concluding that the reduction was excessive. In addition, the commission determined that the annual education allowance of up to 1 million won for four years and 12 days of paid leave per year, as proposed by the company, could not be considered substantial compensation for the reduced wages.

The commission also stated that in the case of Foundation B, where the wage peak system was applied to two other complainants, reducing wages without compensation also constituted discrimination. Foundation B reduced the salaries of the two complainants for most of the wage peak period, except for the last three months, without any significant compensatory measures.

In response, the foundation explained that it had revised its wage peak system regulations due to operational difficulties and, through an agreement with the complainants, implemented shortened working hours for three months. However, the commission concluded that, considering the three-year wage peak period, such measures could not be regarded as substantial compensation.

The commission emphasized, "The wage peak system is not simply a wage reduction policy but a system designed to harmonize employment stability for older workers with organizational management. If employees suffer disadvantages, appropriate supplementary measures must be provided."