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Overview for Korean Labor Issues. Global Standard vs. Korean Standard. Global Standards vs. Korean Standard (1). TIK, KIK. Inflexibility of labor market. Labor unions. Militancy Paternalistic labor relations double standard No workforce replacement during strikes.
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Global Standards vs. Korean Standard (1) TIK, KIK • Inflexibility of labor market • Labor unions • Militancy • Paternalistic labor relations double standard • No workforce replacement during strikes • Weak enforcement of law and order • Less focus on compliance (codes of conduct) : more focus on affection
Global Standards vs. Korean Standard (2) • Compensation and benefits (C & B) • Hobong vs. Merit pay • Many kinds of allowances • Mandatory severance allowance • Compensation requirement for unused annual leave • Korean position title promotion • Korean position title → complicated hierarchy (Based on Seniority)
Labor Unions in Korea Background and History of Labor Relations • Just over 25years history of democracy in Korea (Key events) • 1987 ~ Volatile period • 1997 ~ Asian economic crisis • 2008 ~ Global economy crisis • Two Umbrella Unions (as of 2011) • Federation of Korean Trade Unions (FKTU) – No. of members : 768,953 (44.7%) • Korean Confederation of Trade Unions (KCTU) – No. of members : 562,310 (32.7%) • The 3rd Labor Union (Korea Labor Unions Confederation) was established • in Nov. 2011 No. of members : 21,913 (1.3%) as of 2011 • Union organizational rate of 10.1% (as of 2011) • Including small & medium-sized companies
Labor Unions in Korea Key Trends in Labor Relations • Industrials unions / bargaining by industrial union • Job security concerns • Non-regular workers (fixed–term employees, part-time employees, • dispatched workers, and outsourcing) Labor Policy of <GH Park> Administration • Job creation • Social dialogue based on “talks and compromise” • Economic democratization • Job security
Labor Disputes Strikes • Total labor disputes in 2012 : 105 Disputes • KCTU : 88 labor disputes (83.8%) • FKTU : 9 labor disputes (8.5%) • Non-affiliate : 6 labor disputes (5.7%) • Others : 2 labor disputes (1.9%) multiple unions in one company • Labor disputes in foreign-invested companies (2012) : 8 Disputes (7.6%) Strikes in Foreign-Invested Companies
Labor Management of Foreign-Invested Companies Characteristics of Labor Relation of Foreign-Invested Companies • Differences in perception on personnel management • Misunderstanding of cultural and value differences • Demands for job security, employee participation in business management, • and high wage increase • Rapid introduction of new working process and systems • Refusal to accept philosophy and institutions of headquarters
Union Formation Legal Requirements • At least 2 employees • No reporting obligation to Company • Registration of labor union at District Government or Ministry of • Employment and Labor Why Unionize ? • Job security • Lack of open communication lines from top to bottom • Low-performers • Influence of national or industry-level unions • Compensation and benefits • Promotion issues
Multiple Union System Permission of multiple union system from July 1, 2011 Multiple Unions at a Workplace Possible Case of Establishment of Multiple Unions Reasons for Establishment • Umbrella Unions’ Intervention • Discrimination, Feeling of Alienation • Hopes for Improvement of Working • Conditions of Non-Regular Workers Non-regular Workers’ union • Competition between Umbrella Unions • Discontent with the cooperative relationship • between the Union and Company • Organization on a regional / industrials basis Industrial Union Existing Union • Reverse discrimination (In comparison with • manufacturing workers), Feeling of Alienation • Discontent with the union’s decision focused • on manufacturing workers Office workers’ Union • Discontent with the cooperative relationship • between the Union and Company • Conflicts among Factions • Competition between Umbrella Unions 2nd Union
Labor-Management Council Composition of Labor-Management Council (LMC) (No less than three and no more than ten members) • Employee Members To be elected by a direct secret ballot of the employees among candidates who received the recommendation of at least 10 employees of the Company (Union chairman and other employee members appointed by Union with a labor union representing a majority of the employees) • Employer Members Representative of the Company and other employer members appointed by the Representative of the Company
Labor-Management Council • Holding Regular Meetings : every 3 months • (If necessary, possible to hold extraordinary meeting) • If the LMC fails to hold a regular meeting, fine of not more than KRW 20 mil. may be levied • Minutes of Meeting • Preparation (date, time and place of meeting members present, the substance of • consultations and agreements, and other matters discussed) • Maintaining • Keeping (to be signed and sealed by all members present, and kept for three years) • Grievance Handling Committee • Fine up to KRW 20 mil. Upon failure to organize Committee
Labor-Management Council Difference between the LMC and Collective Bargaining
Non-Regular Workers Protection of Fixed-Term and Part-Time Employees Act (PFPEA) & Protection of Dispatched Workers Act (PDWA) - Effective July 1, 2007 • Fixed-Term Workers /Part-time Workers / Dispatched Workers + Outsourced • Workers issues • Fixed-Term Workers & Dispatched Workers : Maximum 2 years • Part-Time Workers ; less than 15 hours per week by averaging 4weeks
Critical Issues for Non-Regular Workers • Discrimination Issues • Salaries and benefit should be equivalent to that of other permanent employees for • the “same or similar” job • Fixed-Term Employees • 2 year threshold applies to all employment contracts executed, renewed or extended on or • after July 1, 2007 • Dispatched Workers – Manpower Supply • 2 year threshold maintained • Expansion to 32 permitted job categories • Retroactive application • Outsourced Workers – Subcontracting / Outsourcing • Degree of supervision and control issues • Could results in fact permanent employee status
MKL target : Maintain Union Free Company • Competitive Salary & Benefits in the market • Open communication through LMC • Employee grievance handling • Bi-monthly whole employee meeting • Initiative in building relationship between company and employees → workshop, social club, occasions…
Annual leave system in Korea Calculating annual leave per service year One day is added for every two years, not exceeding 25 days Legal background [Labor Standard Act] [Article 59-2] Promoting the use of annual paid leave If a worker does not use leave notwithstanding the fact that a Company takes measure falling under any of the following subparagraph to promote the use of paid leave, his/her leave will be forfeited and the Company shall have no obligation to compensate the worker for unused leave. 1. Within the first 10days of three months before unused leave is forfeited,the Company shall notify each worker of the number of his/her unused leave days and urge them in writing to decide when they would prefer to claim the leave and to inform the Company of the decided leave period. 2. In case notwithstanding the notification prescribed in subparagraph 1, a worker fails to decide when to use the whole or part of the unused leave and inform the Company of the decided leave period within 10 days after notice, the Company shall decide for the worker when to use the unused leave and notify the worker of the decided leave period in writing no later than 2 months before the unused leave is forfeited. MKL took all the actions to the salaried employees according to the Law
Difficulties at MKL • Procedure for refusal to receive labor service of the employees. In order to be freed from the obligation to compensate the employees for the unused leave, company should express intention of refusal to receive labor service of the employees after taking actions what require LSA. Under HMC’s steep volume increase in 2011, 2012, company asked salaried employees for helping production during weekend under government restriction for more overtime and holiday working and salaried employees made 10,100 BSMs in 2012. 2. Insufficient salaried HC After taken leave, some employees should come to the company on weekend and holiday
Benchmarked data MKL PLAN :
Annual leave Calendar Aug, 2013 Sample of annual leave calendar Sun Mon Tue Wed The Fri Sat All for summer vacation 1 2 1 1 4 1 1 9 2 3 2 2 3 4 2 2 2 4 6
Merit Increase & Korean title promotional increase
Participants information 100 companies participated in this survey and the details are as follow. Industry Location of Corporate
Actual Merit Increase Rate by Industry for the 1st of 2013 Actual merit increase in 2013 Industry
Survey Data for Merit Increase Rate for 2014 Target increase rate Industry
Survey data for Local companies Faurecia 5.5% Magna 3.0%~3.7% ; has lots of long serviced employees
Minimum Wage for hourly Minimum wage increase history No salary gap or turn around between o/s Empl. And MKL Empl. For Hourly Hourly wage comparison Outsourcing Employees MKL Employees
PIIP Performance Improvement Incentive Plan
Against base salary- Against base salary Dormitory- % of fixed salary Fixed bonus Payment Commutingbus Monthly working hour
Group term life insurance This plan has been approved by corporate in 2009 Survey data for Local companies Cost impact expected will be about 36 million won
MKL's Current Position 1. Difficulties in attracting talented people due to low remuneration compared to the same line of businesses * In addition, geographically, it is not easy to hire talents.2. Limitation in keeping Union Free Company * Possibility for formation of Trade Unions is high (even multiple trade unions, which is effective July 1, 2011)* Korea has two kinds of umbrella unions (KCTU-The Korean Confederation of Trade Unions and FKTU-the Federation of Korea Trade Unions) * Most unionized manufacturing companies belong to KCTU-militant. * MKL's remuneration level is still behind other companies with the same size and same volume. * MKL employees may compare their salary level with neighboring companies around MKL.* Many small and medium companies will be around industrial complex where MKL is located in two or three years so this area will not be free from the trade union.3. High Risk to lose Talented People * Skilled employees' turnover is expected. 4. Risk for using outsourced employees* Difficulties in meeting legal requirements fully according to a tight control over non-regular employees by law* Outsourced employees have a right to create Trade Unions.5. High Inflation Rate Actual inflation rate is higher than government statistics.
