Labor Ministry Excludes Profit-Linked Bonuses from Mandatory Bargaining

The government has determined that profit-linked performance bonuses, such as those tied to a company's operating profit, are not subject to mandatory bargaining by employers, according to the Ministry of Employment and Labor. These bonuses are considered to pose a significant risk of infringing upon the rights and interests of third parties, including the government and shareholders, and may limit funds available for crucial investments like research and development.

However, demands for a certain percentage of annual salary or base pay, or fixed amounts, fall within the scope of mandatory bargaining, as these are seen as legitimate. Major recent issues, such as Samsung Electronics' bonus dispute and the construction of a new semiconductor plant in the Honam region, serve as examples in the draft "Guidance on Matters Subject to Labor Disputes, Including Management Performance Bonuses."

Decisions related to the construction of a new plant, sale of a business, or introduction of new technologies, like artificial intelligence, are deemed management decisions and are not subject to mandatory bargaining. A union can only demand bargaining with management if these changes result in objectively concrete working condition alterations, such as layoffs or restructuring. If negotiations fail, the union may exercise its right to strike.

The guidance aims to provide clarity and serve as a practical standard for businesses and unions during collective bargaining and labor-dispute mediation processes. While not legally binding, if unions reject the guidance and proceed with industrial action, the final determination of its legality would likely rest in the courts.