The structure of the salary system among Korean companies is vastly different from what many of us will be accustomed to back at home.
Western companies typically operate on a job role remuneration system where your pay is linked to your unique job role. Under this system, an accountant, engineer, marketer, administrator, lawyer etc, will all receive varying salary levels across different experience levels and industries.
In Korea, however, most companies do not adopt a job-role remuneration system. Instead, the large majority of companies, including the major chaebols, use a length of service remuneration model. Pay is essentially based on your level in the company, which is largely linked to your age and the year you first joined the company (or industry). I have previously outlined Korean company hierarchy in an article about Korean company hierarchy structure and business titles.
What is unique about this system is that it is amazingly homogeneous (much like the population) across multiple companies, industries, and professions. A new HR graduate recruit at a company will be on the same pay level as a new graduate engineer at the same company despite the obvious difference in importance among job roles.
As an Australian, my future pay is determined largely by the profession I have chosen to pursue and on market availability but in Korea, this is not the case. Although Koreans and particularly HR teams believe pay packets are an industry secret, on the contrary, there is a large amount of readily available statistics in Korean outlining the average wage for each level at various sized companies. The idea of confidentiality is therefore wishful thinking, considering that pay across multiple industries and companies is largely similar. I have chosen these stats as my market average in the table below.
1,000 KRW = $0.88 US (July 2016)
|Level||Years Working||Market Average Pay (Yearly)||Mid- Large Chaebols Pay (Yearly)|
|사원 (Sawon)||0 to 3 Years||26,000,000 KRW||35,000,000 – 45,000,000 KRW|
|대리 (Daeri)||3 to 7 Years||36,000,000 KRW||40,000,000 – 55,000,000 KRW|
|과장 (KwaJang)||7 to 12 Years||46,000,000 KRW||50,000,000 – 65,000,000 KRW|
|차장/부장 (Chajang / Bujang)||15+ Years||53 ~ 59,000,000 KRW||60,000,000+ KRW|
|임원 (Company Directors)||20+ Years||65,000,000 +++||100,000,000* + KRW|
I have compared these stats to my own experience working for a mid-large Korean multinational in the HR department (Yes, I looked at everyone’s pay!). My initial pay as a graduate was set at 36,000,000 KRW annually which I would say is a good figure and around the level that most new workers going into the major companies can expect. Companies such as LG, Samsung, Hyundai, Dongbu, Hanhwa, Gumho, Doosan, SK etc will be paying 35,000,000 KRW or above for new recruits. Now as I have stated above, all new graduates regardless of profession or job role were on the same amount at my company and is standard practice in the Korean market. As employees progress through their careers they will naturally see pay increases at varying rates due to either positive or negative performance reviews but regardless they are always going to fall within a similar range.
As you can see from the table, the market salary in Korea and even at the major companies is a lot less than in the current Australian, British and American markets. Although these figures do not take into consideration any year-end bonuses which are common in Korea, this figure is also exclusive of any superannuation. If we look just purely at base salary then we can see that in the numbers, depending on profession and industry in Australia, it is likely that an average pay packet of 65,000 AUD for 3-5 years experience, would convert to the same base salary level as a Chajang/Bujang (which is effectively a team leader/senior manager in Korea). You can see instantly how this can create issues with Korean companies operating overseas and why they generally hold conservative attitudes with regards to setting pay scales. What also needs to be noted is that different levels are also tiered. Hence a Sawon is ranked at level 1, 2, 3 before moving up into a Daeri position. How much your pay increases within those levels are set by a band and your own performance review. Regardless of whether I have performed well or not, I can still expect to receive the Daeri pay rate after my 3-4 years of experience at the company. This is also true at the director level where there are effectively junior (이사), through to senior directors (사장/회장), and pay at this level can vary from anywhere between $100,000 a year to monopoly man (Huge salaries!).
This creates its own unique issue in rewarding complacency and loyalty over work performance. Many of those today in director positions at Korean companies have simply benefited from staying in the company for over 20 years, which in reflection is a massive achievement given Korean working hours and drinking culture. It also means they haven’t been forced out without getting their reward but this isn’t always a true reflection of their business and managerial acumen. An ageing population is putting pressure on bottom lines and forcing corporate “restructuring” in order to lay-off those who are set to become a director and to avoid the high salaries and potentially massive pension payouts. Currently, the retirement age is 60 but those in major Chaebols are usually forced out at age 55. This creates a generation of workers aged 55 – 65 who move into small business ownership, such as fried chicken takeaway joints or into other areas with elderly employees, such as taxi drivers and apartment complex security.
That said, looking at base salaries only does not fairly depict the Korean benefit package. What is often overlooked and important to remember for both Korean companies operating overseas and for foreigners working in Korea is that Korean company salary packages are specifically tailored to the “employment for life” model in which low salary bases are supplemented by a raft of benefits. These include full health insurance, education costs for dependent children, gym memberships, daily meal provisions or stipends, training funds, mobile/petrol reimbursement, housing support and pension funds. All of these benefits are structured to reward employees who stay with the company for long periods.
As an example, my previous company would pay for dependent children’s education fees after 5 years of service; after 7 years of service, this was then extended to cover university fees for children. So if you had timed it right you could be essentially receiving an extra A$20-30,000 per year for your children’s university fees! Not a bad deal considering that base salary is likely to be under 70,000,000 KRW / year. Of course, if we then factor in the cost of living in Australia compared to Korea with significant savings from transport, food and rent by living in Korea then it all becomes relatively similar.
*The above chart is just a guide and should not be interpreted as an exact reflection of the Korean market but I hope it does provide some insight into the Korean salary system.
More Asia Options articles on how to build your career in South Korea
- How to find internship and job opportunities in Korea
- How to write a Korean resume
- Applying for a job in Korea – What you need to know
- Korean company hierarchy, structure and business titles
- How to get TV and modeling jobs in Korea? Finding media & entertainment opportunities in Korea
- Korean overtime and why Korea has the second longest working hours in the OECD
- Your Guide to Teaching ESL in Korea
- Korea’s OASIS Start-up Visa Program for foreigners
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