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Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. SEOUL (Reuters) - In a bid to curb rising domestic labor costs, Hyundai Motor Co is seeking to base wages on merit not seniority in an overhaul of a decades-old salary system that puts the South Korean firm on a collision course with its activist union. South Korea is the world's fastest ageing major economy, and high labor costs are eroding its manufacturers' competitive edge as economic growth slows.
If Hyundai Motor, one of South Korea's biggest employers, succeeds in revamping its pay structure, other companies are likely to follow suit. Hyundai Motor is the flagship company of South Korea's second largest conglomerate, and one of its most influential.
The restructuring proposal would not reduce current wages or result in immediate cost savings, the company said, declining to say how much savings it was targeting.
While more Korean companies are basing pay on merit, the majority still use a seniority based wage structure or a combination of both. Among Hyundai's main Asian rivals, Japan's Nissan Motor Co introduced a performance-based pay system under CEO Carlos Ghosn, who has been at the helm since 1999.
Hyundai's union, which has gone on strike over wage talks during all but four of the last 27 years, has already rejected the wage proposal, setting the stage for what is likely to be an acrimonious round of annual pay negotiations this summer. A union spokesman said it would only consider the proposal if the company agrees to include regular bonuses in base wages, a change management said would lead to even higher costs. Hyundai's seven factories in South Korea, five of which comprise the world's biggest car making complex in Ulsan, account for almost 40 percent of its total output.
While the company does not disclose its labor costs by country, Daiwa Securities estimates the hourly labor cost at Hyundai's domestic factories was 24,778 won ($23) per worker in 2012, triple the 7,711 won for its China plants and above the 21,422 won average for its U.S.


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That will accelerate a move away from a wage system still prevalent in South Korea and which is a legacy of years of heady economic growth and a culture that reveres seniority. Its long-serving workers in Korea earn nearly twice as much as junior workers doing similar work, a company spokesman said, and overall, they are paid more than their colleagues elsewhere, including in the United States. Experts, however, said it would control future wage costs as workers age and the company's growth slows. I have spent the last 2 years putting together information on how I have mastered the Affiliate Marketing puzzle and I actually created a free course outlining how I did it.
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