Profit-Sharing Strikes Expand Beyond Semiconductors in South Korea

Profit-sharing strikes spread beyond semiconductors

Union demands for profit-sharing bonuses are spreading rapidly following Samsung Electronics' agreement with its labor union on performance-based compensation. Concerns that the semiconductor industry's model of linking bonuses to a fixed percentage of profits could spread across the broader economy are becoming a reality.

Unions representing five Kakao affiliates have announced a partial strike for June 1, with performance bonuses among the key issues. They are reportedly demanding compensation equivalent to 13 to 14 percent of operating profit. The Hyundai Motor union is seeking bonuses equal to 30 percent of net profit, while unions at Kia, HD Hyundai Heavy Industries and LG U+ are demanding 30 percent of operating profit.

These companies are leaders in the IT, automotive, shipbuilding and telecommunications sectors. If employers continue to accept fixed-percentage profit-sharing bonuses under strike pressure, as Samsung Electronics did, such arrangements could become standard practice across industries.

Alarmed by the trend, the Korea Enterprises Federation recently advised member companies that percentage-based profit-sharing bonuses are not subject to collective bargaining. Because such bonuses depend on business performance, the federation argues, they are not wages paid directly in exchange for labor and therefore fall outside the scope of mandatory bargaining. Strikes over such demands could raise legal concerns.

Shareholder groups have also voiced objections. The Korea Shareholder Activist Alliance held a news conference at the National Assembly, arguing that allocating a fixed share of pretax operating profit to bonuses without shareholder approval is unlawful. The group warned of possible legal action.

Despite these concerns, profit-sharing has emerged as one of the hottest issues in this year's summer labor negotiations. The trend has spread even to industries facing deteriorating business conditions and restructuring discussions. At LG Chem, some have reportedly argued that dividends received from subsidiary LG Energy Solution should be used as a source of bonus payments.

At the same time, unions at suppliers to major corporations are becoming more active, encouraged by the so-called Yellow Envelope Law, the revised labor union law. The resulting uncertainty and workplace conflict should not be ignored.