Hyundai Seeks to Decouple Pay from Seniority

Hyundai Motor Co. wants to index the pay of its hourly workers in the future to merit rather than seniority, Reuters reports.

In a letter to workers, CEO Yoon Gap-han says the company's domestic wages have reached a "critical limit" that could force Hyundai to move production out of South Korea. His proposal would protect current wages but implement a scheme to award future raises on merit.

Current earnings for Hyundai's seasoned workers can be twice that of new hires, according to Reuters. The company's average worker is more than 45 years old. Hyundai worries that, without a change in wage structure, its aging workforce and the prospect of slower growth ahead will eventually erode earnings.

Hyundai's militant union, which has gone on strike in 23 of the past 27 years, has already rejected management's proposal. The union also warns of "strong headwinds" if the company pursues the plan. One analyst describes the proposal to Reuters as "wishful thinking."