Labor circles have welcomed the latest Supreme Court ruling against the peak wage system, a scheme introduced by firms to gradually reduce the salary of senior workers ahead of retirement.

Calling the verdict an "inevitable outcome," the Federation of Korean Trade Unions on Thursday criticized the government for advocating for the system when it was first introduced as a means of increasing youth employment.

The group noted that the system largely failed to yield the intended hiring results over the last five years while workers saw a decline in wages.

It said the peak wage system, in which pay levels are slashed based on age, must not continue and pledged efforts to invalidate the rule at workplaces.

The Korean Confederation of Trade Unions also welcomed the top court’s ruling, describing it as a proactive interpretation guaranteeing labor rights.

Employers, meanwhile, expressed regret over the decision. The Federation of Korean Industries said the ruling should serve to spur discussions on improving the peak wage system, stressing that its abolishment will have a negative impact on employment stability.

The top court ruled on Thursday that the peak wage rule is tantamount to illegal discrimination against workers on the basis of age. The ruling is likely to trigger other lawsuits and related labor-management negotiations.