South Korea struggles to keep firms in line over Kaesong wage row

The South Korean government struggled Friday to prevent company managers conceding to North Korean wage rise demands for workers in their joint industrial zone in Kaesong.

The Unification Ministry admitted that around a dozen South Korean companies operating in the zone had -- contrary to Seoul's directions -- signed a note promising to pay an increased wage.

The North unilaterally announced in February a salary hike for the more than 50,000 North Korean workers employed by the 125 South Korean firms in Kaesong, just north of the inter-Korean border.

South Korea demurred, insisting that under a previous accord, employment conditions in the zone could only be adjusted with the agreement of both sides.

The ministry has warned any firms yielding to pressure would face "administrative punitive action".

As the row intensified, the North set a Friday deadline for factory owners to pay the increase or provide a written guarantee they would do so.

Any company not complying would face arrears charges.

Top Unification Ministry officials were set to hold talks with around 20 owners later Friday.

The North's proposal would increase the average monthly sum the South pays for each worker -- including allowances, welfare and overtime -- from $155 to $164.

The South Korean firms in Kaesong get cheap labour on top of preferential loans and tax breaks from their government, which also effectively underwrites their investment.

Kaesong opened in 2004 and had survived repeated inter-Korean crises that closed off every other avenue of cooperation.

But in 2013, the North effectively shut down the zone for five months by withdrawing its workers following a surge in military tensions. Many firms are still reeling from financial losses from the shutdown.

Kaesong is a key earner for the cash-strapped North. The hard currency wages are kept by the state, which passes on a fraction -- in local currency -- to the workers.