eNewsletter

Foreign companies setting up business in Korea should recognize the country’s distinct cultural traits and labor dynamics before implementing global HR practices into the Korean workplace.    

For example, Standard Chartered (a London-Based Bank) caused significant tension with its Korean employees after the bank’s decision to switch from seniority based pay to performance based pay.  

Standard Chartered claims that this reform will improve productivity and help the company progress in a competitive global market.  This pay change was in response to the bank’s weak growth vis-à-vis its competition.  In 2011, SC First Bank (Standard Chartered's Korean banking unit) was forced to close 27 of its 392 branches in South Korea.  The bank’s operating profit climbed only 19% at the end of 2010, compared with a 30% growth in its competitors (i.e. Shinhan Bank and Woori Bank).  In addition, its loan market share dropped from 8.2% in 2004 to 5.7% by the end of 2010.  

As a result of the new pay scheme, about 2,800 workers at SC First Bank launched an “indefinite” strike on June 27th, 2011.  The workers are currently in their fifth week of the strike.  This protest is the worst labor dispute in the Korean banking sector in years.  

Traditionally, worker compensation in Korean banks, as well as at other Korean companies, is dependent upon the length of service and seniority.  Confucian-rooted hierarchies in South Korea favor older workers over younger ones.  “The Korean labor market and wage structure are [very] different from those of foreign markets.  This country was NOT built on competition between individuals,” says the chairman of the union at SC First Bank.  He also stated that Korean culture is used to employees working at companies together.