Sixty-nine state-run institutions, including Korea Railroad Corp., or KORAIL, and Korea Electric Power Corp, or KEPCO, plan to cut some 20,000 jobs over the next three to four years. In addition, all state-run institutions will be required to adopt a “wage peak system” and an “annual salary system” and employees with sluggish performance will be forced to leave. These measures, part of the latest government restructuring plan for state-run institutions, are expected to increase job insecurity for employees at the state-run institutions and make them freeze new hiring.

On Sunday, the government announced what it is calling the “fourth plan for the development of public institutions,” which is focused on cutting jobs at 69 state-run institutions. In fact, 13 percent of the 150,000 jobs at the state-run institutions will be cut, an approximate total of 19,400 jobs.

The number of job cuts at state-run companies and institutions is likely to grow. The government is hoping to finalize a “management-efficiency plan” for 209 of 278 state-run institutions early next year through consultations with the related ministries. The 209 institutions were not affected by the “fourth development plan.”

Under that plan, of the 19,400 positions slated for elimination, 4,500 jobs will be cut and outsourced to private companies. Another 5,900 employees categorized as “non-essential” will also be fired. The remaining 9,000 employees will be made redundant and their jobs will be done by computers, will be automated or will be eliminated through improvement of the management system.

KORAIL will be the most affected by the plan, which calls for it to cut 15.9 percent of its staff, or 5,115 people. KEPCO and Korea Hydro & Nuclear Power Co. will be required to cut 2,420 and 1,067 jobs, respectively.

KORAIL Retail, a subsidiary of KORAIL, will see the highest “reduction ratio,” the ratio of job cuts to the total number of employees, at 37.5 percent.

Six other state-run institutions will be required to cut over 20 percent of their staff. The Korea National Tourism Organization will see a 28.9 percent staff reduction and the Korea Broadcasting Advertising Corp., 20.2 percent.

Bae Kook-hwan, the second vice minister at the Ministry of Strategy and Finance, said, “Through early retirement and other workforce reduction methods, the size of the workforce will gradually be decreased over the next three to four years. The government will eventually encourage public institutions to hire new employees to make up for the decrease.”

Hiring at public institutions is likely to be frozen for a while as the institutions have been reluctant to hire new employees to balance the number of employees dismissed. The job cuts are likely to save 1.1 trillion won (US$850 million) in the federal budget. The government says it will use a portion of the money saved to encourage state-run institutions to employ some 10,000 interns next year.

With the aim of increasing efficiency in the public sector, the government is also planning to implement an across the board “annual salary system” and a “wage peak system,” both of which have already been adopted by some state-run institutions. In the “annual salary system,” employees are paid a yearly salary. In the “wage peak system,” employee salaries peak when employees are in their early fifties and decline from there.

Under another plan, employees with sluggish job performance will face automatic dismissal.

In addition, the “management-contract system,” in which the terms of the contracts of executive employees are directly related to the company’s balance sheet, would be expanded to include managers at all state-run institutions. Under a “uniform structure-efficiency plan,” the number of employees working in departments such as public relations and planning will be slashed.

The government says it is also planning to sell 8.5 trillion won of the assets held by the 69 state-run institutions. This includes land held by KORAIL that is part of the Yongsan subway station (valued at 7.6 trillion won); two buildings and old homes that are owned and leased by the Government Employee Pension Service (valued at 200 billion won); land that is part of a horse-racing stadium in Gyeongju held by Korea Racing Authority (16 billion won); and employee housing owned by Korea Gas Corp. (valued at 36.2 billion won).

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