Instead, the government is expected to maintain the new pay system by urging the management and labor of public agencies, which have put the new pay system in place without a bilateral agreement, to find common ground.

"The merit pay system will be maintained at public agencies, which have agreed to adopt it," a finance ministry official said. "Public agencies, which are embroiled in labor-management conflict over the system, will be induced to move in a progressive way." 

In early 2016, the Park Geun-hye government decided to expand the merit pay system to all public agency employees, requiring all public institutions to adopt it by the end of that year. The system started being applied to executive members of public institutions in 2010.

The merit pay system calls for employees to be paid differently based on their achievements, with the difference in their annual salary expanding to an average of 3 percent from 2 percent.

According to the government, all the 120 public firms and institutions introduced the expanded merit pay system by early June last year, which sparked a strong backlash from their labor unions.

So far, labor unions of 48 public agencies have sought a court injunction against the new wage system, arguing their management have unilaterally introduced it. The conservative Federation of Korean Trade Unions has filed a petition with the Constitutional Court against the government push for the system's implementation.

Unionized workers of the Korea Railroad Corp. downed tools for more than 70 days late last year to protest the move, with the nation's two umbrella unions holding massive protest rallies. (Yonhap)