In May 2023, Hanwha Group officially acquired Daewoo Shipbuilding & Marine Engineering, one of the three largest shipbuilding giants in Korea, and renamed it Hanwha Ocean, embarking on a new journey as a shipbuilding subsidiary of Hanwha Group. In the year or so since it was acquired by Hanwha Group, Hanwha Ocean has adjusted its employee compensation system twice.
Hanwha Ocean recently announced the company’s decision to revise and implement the provisions of the employment system for office technology employees from July 1, 2024 onwards. The modifications include unpaid health vacation, the abolition of the paid leave system, and deductions for early retirement and departure. The revision is expected to be controversial as it focuses on reducing benefits for current employees. However, Hanwha Ocean’s position is that this is a systemic change aimed at correcting inequities.
Korean media reported that Hanwha Ocean has held a six-day voting ceremony from June 19 to 24, 2024, and said that more than 4,000 clerks/office technicians (48% of the total 8,415 employees) have agreed to amend the relevant employment system provisions. The results showed an approval rate of approximately 60.1% and a disapproval rate of approximately 39.9%.
Effective July 1, 2024, the Hanwha Ocean Office Technician job category has been renamed “General Worker.” Other changes include the introduction of 20 hours of fixed overtime (OT) pay for responsible employees (which will be maintained annually if the requirements are met), unpaid health leave, the abolition of the paid leave system, early retirement and out-of-office payroll deductions, adjustments to the current Labor Standards Act limits on wage reductions for dismissal warnings and disciplinary actions, revisions to the rules governing the employment of office technicians (paid vacations and Saturdays), the standard number of hours of work for calculating ordinary wages (240 hours), and clarification of the current standards for medical examinations.
In response to Hanwha Ocean’s move, the head of the company’s office staff said, “The company has determined that the use of paid health leave is abusive, but if health leave for women is an excessive benefit, it should not be eliminated and the same benefit should be provided for men. Unpaid health leave would mean that trips to the bank or hospital would be reduced to 25% and benefits would be reduced.”
Hanwha Ocean explained this by saying, “Under the existing system of paid health leave, female employees are paid even if they use it for personal use rather than health leave. Some of them believe that adjusting the provisions of the employment system will lower the benefits. However, others pointed out that it is unfair that some people are paid through their work while others are paid during their breaks, so the company made changes to the relevant system through the employee consent process to correct the unfairness.” And he added: “The additional payment of fixed overtime and the development of a new half-rest, half-work system actually benefited employees. The focus of the company’s system changes was to increase the benefits package and to correct the unfairness.”
At present, the Korean shipbuilding industry is facing a serious labor shortage, and the shipyards have entered into a white-hot rush for manpower, with salaries and wages becoming the key direction for major shipbuilding companies to attract manpower. In response to this, Hanwha Ocean announced a salary adjustment plan to all employees on July 18, 2023, when Hanwha Ocean had just been incorporated into the Hanwha Group, and regarded this salary adjustment as one of the important measures to promote the normalization of management.
Hanwha Ocean’s July 2023 salary increase covers more than 3,000 employees, including officers and senior management, and after the adjustment, the average annual salary of Hanwha Ocean’s employees was raised by KRW 10 million compared with that of 2022.
Although the revision and implementation of the new employment system regulations have been supported by the majority of Hanwha Ocean’s employees, the negative vote of nearly 40% will most likely have a negative impact on Hanwha Ocean. Not only that, Hanwha Ocean’s merchant ship order book is not good. The Korean industry expects that although Hanwha Ocean returns to profitability in the first quarter of 2024, profitability levels may begin to deteriorate from 2025 onwards due to fewer orders to support future performance.