Labor ministry's new guidelines exclude profit-linked bonus demands from mandatory bargaining

On September 3, the labor ministry released new guidelines for labor negotiations in South Korea, clarifying that profit-linked bonus demands cannot be mandatory items in collective bargaining. The new guidelines, enacted to clarify the revised trade union law that took effect in March, also expand the bargaining rights of subcontracted workers and enhance the accountability of prime contractors.

While the revision broadened the range of labor-management issues eligible for negotiation, it also created ambiguity about the scope of legally allowed negotiations between labor and management.

The guidelines address several pressing labor issues, such as the performance bonus demands from Samsung Electronics labor union and the plans to build a new semiconductor complex in the southwest of the country. Under the guidelines, performance bonuses fixed to a certain percentage of a company's profit are voluntary subjects of negotiation but not mandatory ones.

The ministry stated that performance bonus demands potentially violating a company's freedom to conduct business and shareholders' rights cannot be mandatory items of bargaining, as they may excessively restrict companies' business decisions and impact third parties, including shareholders.

Performance bonuses tied to a company's earnings may violate the rights and interests of third parties, such as shareholders, and excessively limit companies' decision-making capabilities. In May, Samsung Electronics reached a pay deal with its labor union, allocating a special semiconductor performance bonus equivalent to 10.5% of business performance earnings.

However, the ministry emphasized that large-scale projects, like the planned semiconductor plants, have uncertain impacts on working conditions, making them non-mandatory subjects of negotiation. The only exception is if the company undergoes personnel restructuring for relocation purposes.