Over 63% of Companies Lack Basic Pay System, Hindering Government Reform

Red flags are flying for the government's push for job and performance-based wage system reform. A Ministry of Employment and Labor survey found that over 6 out of 10 domestic companies (63.1%) still lack a basic pay system. According to the Ministry of Employment and Labor's 'Additional Survey on Business Labor Force Survey as of June 2025,' 63.1% of domestic businesses were in a 'no system' state, lacking a separate pay structure.

This proportion rose from 48.5% in 2014 to 55.9% in 2019, peaked at 64% in 2024, and stood at 63.1% last year. The absence of a pay system was more pronounced in smaller businesses. The proportion of businesses with no system among those with fewer than 100 employees was 63.4%, higher than the 4.8% for businesses with 100 or more employees. 76.2% of businesses with fewer than 5 employees had no system, compared to 3.7% for those with over 1,000 employees. By industry, 'Accommodation and Food Service Activities' had the highest proportion of businesses with no system at 79.9%, while 'Financial and Insurance Activities' stood at 15.3%.

The proportion of companies using seniority-based pay decreased from 27.1% in 2014 to 13.1% last year. Skills-based pay fell from 23.3% in 2014 to 9.5% last year, and job-based pay declined from 12.2% in 2014 to 8.6% last year. The number of companies that introduced a performance-based pay system decreased from 11.9% in 2012 to 6.5% last year. Last year, 6.2% of businesses with fewer than 100 employees adopted performance-based pay, compared to 38.4% of businesses with 100 or more employees.

The Ministry of Employment and Labor will support standard wage model development for six sectors this year, including shipbuilding, auto parts, IT, biotech, petrochemicals, and steel. A ministry official stated that wage information will be provided based on industry, size, occupation, and tenure to help businesses, workers, and labor unions utilize it in wage negotiations.