Autumn labor talks at South Korea’s three major shipbuilders near an end; subcontractor talks remain a hurdle

[Financial News] Autumn labor-management negotiations at South Korea’s three major shipbuilders are nearing completion. After Samsung Heavy Industries, HD Hyundai Heavy Industries has reached a deal on this year’s wages and collective bargaining agreement, and Hanwha Ocean has also drawn up a tentative agreement. As disputes over the distribution of performance-based pay begin to ease, the shipbuilders can breathe a sigh of relief. However, negotiations with subcontractor unions remain a separate issue, as this year’s implementation of the Yellow Envelope Act expanded prime contractors’ bargaining responsibilities.
According to the shipbuilding industry on the 29th, Hanwha Ocean’s labor and management reached a tentative agreement at their 30th bargaining session on the 27th, including a 140,000-won increase in base pay and lump-sum payments totaling 8.5 million won. The agreement includes a 5.52% increase in base pay, a 4.5-million-won settlement bonus, a 1-million-won mutual-growth incentive, and a 3-million-won incentive for innovation through artificial intelligence transformation (AX).
The parties agreed to revise the payment criteria for performance bonuses, a key point of contention. They will run a task force (TF) through the end of the year to establish criteria for financial performance bonuses based on factors including operating profit, revenue, operating margin, and safety indicators. The tentative agreement will be finalized if it passes a vote by union members that day.
If the tentative agreement passes the vote, all three major shipbuilders in South Korea are expected to conclude this year’s labor-management negotiations. At HD Hyundai Heavy Industries, members approved the second tentative agreement in a vote on the 27th, with 55.06% voting in favor. The main terms include a 120,000-won increase in base pay, a lump sum of 11.5 million won and 200%, and 300,000 won in welfare points. The deal was reached after renegotiations following the rejection of the first tentative agreement, and, after the integration with HD Hyundai Mipo, the differing collective agreements and work rules were also brought into line. Samsung Heavy Industries concluded its wage negotiations first, in September, with 58.78% voting in favor. The parties agreed to a 131,786-won increase in base pay, a 7-million-won incentive payment, and a performance-bonus calculation based on 10% of this year’s operating profit.
However, separate from the tentative agreement between the regular employees’ union and management, negotiations with subcontractor unions remain outstanding.
In Hanwha Ocean’s case, separate negotiations are under way, apart from the current tentative agreement, with the Geoje-Tongyeong-Goseong Shipbuilding Subcontractors’ Branch, an organization of subcontractor workers engaged in shipbuilding and related work, and the Welliv Branch, which brings together workers at companies providing meals, operating shuttle buses, and managing facilities. Both organizations are affiliated with the Korean Metal Workers’ Union (KMWU). HD Hyundai Heavy Industries has yet to set a date even for an initial meeting with its subcontractor union. Since companies are having to negotiate with subcontractor unions for the first time following the full implementation of the Yellow Envelope Act this year, it is expected to take considerable time to reach an agreement.
The Yellow Envelope Act, which took effect in March this year, requires a prime contractor to take responsibility for bargaining over working conditions if it can determine those conditions substantially and specifically, even when it is not the company that directly employs the workers. This has led to disagreements over which subcontractor unions prime contractors must negotiate with and what issues they must discuss. In Hanwha Ocean’s case, the company challenged a Labor Relations Commission decision requiring the Welliv Branch to be included in the bargaining process and sought a stay of execution. After the court rejected the request, Hanwha Ocean began its first negotiations with the two subcontractor unions on the 8th of this month.


[email protected] Jung Won-il Reporter