The environment of business management is rapidly changing as the survival of the fittest is becoming a principle amid internationalization, globalization and openness. Under this circumstance of indefinite competition, businesses are absolutely needed to change wage payment system under the seniority rule to annual salary system. Recently more and more local companies have introduced annual system in which compensation is determined according to each worker's capability and accomplishment, becoming a greatly changing blow to the existing payment system under the seniority rule. Annual salary system intends to promote employees' desire for work, increase productivity and innovate organizational climate by adding a motivational factor to the traditional salary system of local businesses under which longer service is rewarded with more payment.
Thus the purpose of this study is to offer effective ways of introducing annual salary system to domestic companies and build up annual salary system ideal to this nation's circumstances by providing a basic concept of the system and reviewing the current situation and cases of the system instruction in this nation.
The current situation of introducing by domestic companies of annual salary system can be summarized as follows.
First, many companies of Korea have already adapted annual salary system as an capability-oriented reward method to motivate workers.
Second, many businesses have introduced annual salary system focusing on managerial positions, which have been found more effective.
Third, annual salary system has raised workers' participatory motivation and made clear their perception of working objectives, ultimately positively influencing workers' motives for their duties.
Fourth, in its initial stage, annual salary system has been found not having better effects of increasing the ability of individual performance and improving organizational climate.
Desirable ways of introducing annual salary system can be suggested as follows.
First, the capability, accomplishment and attitude of each worker should be evaluated objectively and fairly in advance to establish annual salary system. As a reward method based on capability, annual salary system should take the objective and fair evaluation as its precondition. In particular, conventional complaints about the existing merit rating system should be solved to achieve positive effects of the annual payment system.
Second, in its initial stage, annual salary system should be applied to provoke competition among workers within the same level. In this case, payments under the system should be different one another only within 5 to 10 %. After annual salary system is established considerably, it is desirable to expand such difference and promote completion among different levels.
Third, annual salary system should be introduced first focusing on managerial and expert positions.
Fourth, payment under annual salary system should be divided into 16 segments. That is, a sixteenth of the total amount should be paid every month over a year, The remaining four sixteenths should be given to workers every quarter in the form of bonus. This can avoid adverse effects of the system introduction.
Prior to the introduction of annual salary system, companies should determine whether they will pay a basic annual salary or add incentives to it. It is recommended to seriously consider the latter to maximize workers' motives.
The original Western annual salary system is in fact far away from this nation's business climates and workers' emotions because it does not allow bonus and benefits as well as retirement grants.
From the view of Korean people, annual salary system should be based on payment system under the seniority rule as long familiar to businesses and workers, and thereon partly added with the capability-based salary system in which workers are differently paid according to their capabilities and accomplishments.
Then the latter system should be expanded ultimately toward the original Western system. In conclusion, annual salary system currently operated in Korea is sort of compromise between the existing payment system under the superiority rule and the original salary system.