The government decided Thursday to expand a performance-based wage system to all public agency employees as part of its plan to improve efficiency in the public sector, the finance ministry said.

The decision, made at a public agency management meeting in Seoul, calls for all public institutions to adopt the merit-based pay system by the end of 2016.

Until now, the government has only implemented the performance-based system with executive members of public institutions since 2010.

Under the merit pay system, employees will be paid differently based on their achievements, with the difference in their annual salary expanding to an average of 3 percent from 2 percent.

More than 70 percent of the employees of 116 public companies and agencies will be subject to the new wage system, up from 7 percent as of now, according to the finance ministry.

The finance ministry said that the people have had to take the burden of increased payroll costs stemming from inefficiency and automatic promotions due to lack of competition.

"The public sector has to spearhead nationwide public and labor reform," Finance Minister Yoo Il-ho said after the meeting. "We are trying to encourage public workers to work harder in their workplace." (Yonhap)