South-Korea based Hyundai Motor Group has announced plans to introduce a peak-wage system that will actually lower the salaries of existing employees as the group’s affiliates seek younger workers.
Hyundai Motor Group is the parent umbrella of South Korea’s largest carmaker Hyundai Motor and has decided that retirement age of workers will be increased at all affiliates to 60, while salaries are reduced and the savings incurred will be used to attract and hire younger people starting next year, according to a recent statement. The specific amounts of pay cuts for the veteran employees will not be decided before the companies have negotiations with their respective labor unions. Hyundai’s strategy comes amid increased support from the government to lift youth employment in a country where the rate of people under 30 with no job is three times bigger than for the rest of the active population. “We will push to increase young workers’ employment by hiring 1,000 more annually,” Hyundai Motor Group said. “The decision to implement the peak-wage system and expand young adults’ employment was made to fulfill our social responsibility of improving job security and to obtain talented workers.”
Unions have already responded negatively to the peak-wage system, which goes against the traditional payment rates based on tenure and age, rather than company performance. The company could expect some form of retaliation from the unions, considering that South Korea’s industrial activism is higher than in other developed countries around the world.