The government announced guidelines in 2016 pushing for
broader implementation of performance-based pay in the public
sphere. The government indicated that it would penalize
state-controlled enterprises with reduced funding if they failed to
follow the guidelines, and many state-controlled enterprises
adopted the recommended changes. This effort is a continuation of
earlier initiatives aimed at reforming public enterprises,
specifically measures to increase efficiency in 2014, and
implementation of a wage-peak system in 2015.
The government justified its decision to implement
performance-based pay more broadly at state-controlled enterprises
on the grounds that public-sector productivity is only 70-80% of
productivity in the private sector, there is a lack of internal
competition at state-controlled enterprises, and their
organizational and remuneration systems do not provide proper
motivation to their workers.
