Supreme Court rules against peak wage system


The Supreme Court of South Korea in southern Seoul. (Yonhap)

The Supreme Court ruled on Thursday against the maximum salary system implemented by a large number of local companies to gradually reduce the salaries of senior workers several years before retirement.

High court says peak wage system unlawfully discriminates against workers on the basis of age, making first such ruling in lawsuit brought by former institute employee local search.

The applicant who joined the institute in 1991 retired honorably in 2014.

The institute introduced the maximum wage system for employees over 55 in January 2009 through an agreement with the union and the claimant became subject to the system in 2011.

The person has filed a lawsuit demanding reimbursement for lost pre-retirement pay, saying base pay was cut after a two-tier drop and a 49-tier drop in skill level under the new system salary.

At issue in the dispute is whether the institute’s peak salary system violates the Law on Prohibition of Age Discrimination in Employment and Promotion of Employment of Older Persons, which prohibits discrimination against workers on the basis of age without reasonable grounds.

The district and appellate courts ruled in favor of the plaintiff, saying the peak wage system is invalid due to its violation of the Elderly Employment Act.

The maximum wage system has been widely adopted by local businesses, particularly in the public sector, since the early 2010s to reduce the wages of their senior employees in order to create more jobs for young people in a rate environment. high youth unemployment.

Lower courts have so far delivered mixed verdicts on the peak pay system, but the Supreme Court’s latest decision is expected to strike at the root of the system. (Yonhap)

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