South Korea issues guidelines excluding profit-tied bonuses from mandatory labor negotiations

SEOUL, Sept. 3 (Yonhap) -- The labor ministry on Thursday issued new guidelines for labor negotiations, outlining demands for bonuses tied to a fixed percentage of a company's profit cannot be a mandatory subject of collective bargaining.

The ministry's new guidelines are designed to clarify the revised trade union law that went into effect in March and expands subcontracted workers' bargaining rights, while increasing the accountability of prime contractors.

While the revision expanded the scope of labor-management issues eligible for legal negotiations, it also caused ambiguity over the extent of negotiations legally allowed between the two parties.

The guidelines address key labor issues that have recently rocked the country, including performance bonus demands from Samsung Electronics' labor union and plans to build a new semiconductor complex in the country's southwest.

Under the guidelines, demands for performance bonuses fixed to a certain percentage of a company's profit can be a voluntary subject of bargaining but do not fall under mandatory subjects of negotiation.

While the trade union law allows collective bargaining for working conditions, including wages, the ministry said performance bonus demands that fundamentally violate a company's freedom to conduct business and shareholders' rights could not be a mandatory subject of bargaining.

The ministry said performance bonus demands linked to company's earnings are likely to violate the rights and interests of third parties, including shareholders, and excessively restrict companies' business decisions.

Performance bonuses have recently surfaced as a major labor issue as the country's chip giants have reaped windfall gains from the artificial intelligence-driven semiconductor supercycle.

Under a pay deal Samsung Electronics reached with its labor union in May, the company will allocate a special semiconductor performance bonus equivalent to 10.5 percent of business performance earnings.

The new guidelines also stipulated that Samsung's plans to build new plants in the country's southwest also cannot be a mandatory subject of negotiation.

Samsung's union earlier said it would treat the company's plans for the new plants as a subject of negotiation, citing the trade union law, which outlines management decisions impacting working conditions are subject to negotiation.

The ministry said large-scale projects, such as the planned semiconductor plants, require long periods of time until they are complete, making the impact on working conditions uncertain.

"If the conditions are uncertain, then it does not become a mandatory subject of bargaining simply due to a possibility," the ministry said.

It, however, noted that the issue would be a mandatory subject of negotiation if the company carries out personnel restructuring for the relocation.

In June, the government announced plans to develop a new semiconductor production base in the southwestern region through 800 trillion won (US$589 billion) in corporate investments.