President Lee Jae-myung ordered a resolution to the Industrial Bank of Korea (IBK)'s wage arrears issue stemming from the total personnel cost system, prompting relevant ministries to launch a full survey of 331 public institutions nationwide. Changes are expected to the total personnel cost system, which has been applied to public institutions for the past 19 years.
According to a compilation of ChosunBiz reporting on the 12th, the Ministry of Economy and Finance is under investigation into difficulties at public institutions caused by the total personnel cost system. A ministry official said, "We are identifying problems by communicating with public institutions nationwide, focusing on the status of wage arrears. We plan to complete the full survey in Jan." Once the full survey is completed, the government is expected to begin preparing improvements to the total personnel cost system based on the findings.
An official at the Financial Services Commission, which oversees state-run banks such as Industrial Bank of Korea (IBK), said, "It is not that only Industrial Bank of Korea (IBK) will be exempted from the total personnel cost system; a major overhaul of the entire system is planned," adding, "It appears it will take some time to prepare the improvement plan."
The total personnel cost system is a kind of "public institution salary cap" implemented since 2007. It sets the aggregates of personnel expenses that can be used in a year, and allows each public institution to execute freely within that scope.
In the past, public institutions were controlled by law on all matters, including workforce size, pay, and benefits, and the total personnel cost system was implemented on the grounds that such controls worsened organizational rigidity and inefficiency. Accordingly, public institutions must set their personnel expense budgets within the annual cap on the rate of increase set by the government.
However, once the personnel expense cap was set, wage arrears effectively became routine, such as paying overtime with leave instead of money. Because the personnel expense aggregates are fixed, situations accumulated in which overtime could not be compensated with pay.
Industrial Bank of Korea (IBK) saw severe labor-management conflict due to the total personnel cost system. The Industrial Bank of Korea (IBK) labor union plans another general strike at the end of this month, following the end of 2024. According to the Financial Industry Union's IBK chapter, the number of unused days of leave granted in lieu of overtime pay in 2024 averaged 35 days per person. Converted to pay, that amounts to 6 million won per person, or about 78 billion won for all Industrial Bank of Korea (IBK) employees.