As the polarization of wages between employees of large and small companies has become a big social issue amid concerns about low growth, attention has been focused on the wages of those at large companies rising rapidly every year.
The Korea Enterprises Federation (KEF) has sent out recommendation letters to high-paying large companies asking them to minimize pay raises and refrain from excessive levels of performance-based bonuses but the large companies are highly unlikely to accept the KEF’s recommendations given their tug of wars with labor unions in their wage and collective bargaining processes.
The Hyundai Motor Company and Kia Corp labor unions recently held their respective congresses to discuss this year’s collective bargaining demands, according to industry sources.
This year’s bargaining is expected to see the labor unions demanding large wage hikes and hefty performance bonuses, given that both Hyundai and Kia posted record profits in 2023.
The Hyundai and Kia labor unions agreed to a base salary increase of 111,000 won in negotiations in 2023. They are poised to demand a bigger base salary increase based on the two carmakers’ record-breaking performances. The average annual salaries which reached 117 million won at Hyundai and 127 million won at Kia in 2023 have a lot of room to soar in 2024. Prior to a full-scale bargaining, the labor unions are also demanding that the management pay special performance-based bonuses separately.
Samsung Electronics which has been a union-free zone for a long time is also facing increasing union pressure after it announced in 2020 that it will end its union-free management.
The company’s largest union, the Nationwide Samsung Electronics Workers’ Union, is demanding a 6.5 percent wage hike and expanded benefits, even as its operating profit plunged 84.9 percent year on year to 6.57 trillion won in 2023.
The management of Samsung Electronics had initially proposed a 2.5 percent base pay increase, but after a tug of war with the union, it raised it to 3.0 percent which is still far from the union’s demands.
In particular, the union is also demanding a reform of the performance pay system including overall performance incentives (OPIs) and target achievement incentives (TAIs) which are determined by business results and individual and organizational performances.
“Even if the management of a company sets the level of wage increases and performance pays at a reasonable level considering its performances and business environment, wages continue to soar due to unreasonable demands from unions,” said an official of the Korean business community. “This leads to a wider gap between small companies that that cannot afford to pay wages and large companies, resulting in a mismatch in the labor market.”