Korea's financial regulator on Thursday said it was considering paying incentives early to public companies that adopt the performance-based salary system ahead of the scheduled deadline in December.
The Financial Services Commission (FSC) is mulling over an early payment of incentives to the country's nine public financial companies, including the Korea Development Bank (KDB) and the Export-Import Bank of Korea (Eximbank Korea), if they introduce the performance-based pay scheme as part of their self-help programs, an FSC official said.
FSC Chairman Yim Jong-yong (Yonhap)
"The government originally planned to provide incentives to the adopters of the merit-based remuneration at the end of this year. But it is considering an incentive payment to early adopting firms late this month or early next month," he said.
The government will allow public financial firms to increase their total annual wages by up to 2 percent this year if they adopt merit-based pay early. But those that delay adopting the system will suffer a reduction or a freeze in wages, the official said.
The move is widely seen as part of the government's stepped-up drive to urge the KDB and the Eximbank Korea to take a restructuring move for themselves before they get a cash injection from the government to pre-emptively respond to possible heavy losses from the country's financially troubled shipbuilding and shipping industries.
The two state-run banks have extended a total of 43 trillion won ($37 billion) to shipbuilders and shipping lines. Much of the loans may turn into nonperforming ones if the cash-strapped companies fail to find ways to stay afloat, dealing a heavy blow to Asia's fourth-biggest economy.
Last year, the KDB inked a record net loss of 1.8 trillion won due to sharply increased loan-loss provisions. Eximbank's net profit fell to 41.1 billion won last year from 85.3 billion won a year earlier.
On Tuesday, FSC Chairman Yim Jong-yong warned that public financial firms failing to comply with the performance-linked pay will be given various disadvantages in compensation, budget allowance and payrolls.
"If not for the thorough self-rescue efforts (at the two state banks), funneling a massive amount of taxpayers' money (into them) would be a hard sell to the general public," Yim said.
In Korea, public financial companies have been criticized for lackluster performances and an easy-going attitude regardless of worsening business environments. In contrast, their private-sector rivals have cut jobs and focused on improving profitability amid low growth and low margins.
In broader efforts to restructure the public sector, the government said on Monday it will freeze the wages of workers at all public companies that fail to introduce or expand the performance-based wage system before the year's end.
On the other hand, those that voluntarily introduce the new wage system before the deadline will be given an incentive of up to 30 percent of their workers' monthly salaries, according to the finance ministry, which aims to introduce the new pay system to 120 public companies and institutions in the first phase by the year's end.
More than 40 percent of the 120 entities introduced or completed a process to introduce the new wage system as of Monday. (Yonhap)