The labor union of three shipbuilding subsidiaries (HD Hyundai Heavy Industries, HD Hyundai Mipo, and HD Hyundai Samho) of HD Korea Shipbuilding & Offshore Engineering (HD KSOE), a shipbuilding intermediate holding company of HD Hyundai Group’s shipbuilding business, has demanded an overhaul of the performance-based pay System, and the inclusion of the holding company’s profits in the existing performance-based pay System is a key element of the demand for this reform. As the shipbuilding industry enters its second boom period, conflicts between labor and management in the Korean shipbuilding industry at the level of performance-based pay System seem to be surfacing.
Korean media reports that the labor unions of HD KSOE’s three shipbuilding subsidiaries have formulated a joint wage and collective bargaining demand for 2024. The demand proposes that the additional performance pay distribution of the operating profit of the intermediate holding company HD KSOE should include the employees of its three shipbuilding subsidiaries.
HD Hyundai Heavy Industries, HD Hyundai Mipo and HD Hyundai Samho shall calculate and pay performance-based pay annually based on their respective operating revenues and operating profits. In addition to this, the union claimed that HD KSOE’s operating profit should be calculated for performance-based pay and it would be paid twice. The union said, “HD KSOE’s operating revenues and operating profits include the fruits of the labor of the three shipbuilding subsidiaries, so the profits should be shared with the workers of the three shipbuilding subsidiaries.”
According to the Korean media, it is largely difficult for the funders to accept the union’s request for the shipbuilder, which has been losing money for years due to the deterioration of the shipbuilding industry and is just starting to turn around.
Some industry insiders believe that the proposal to use the holding company’s own funds to pay performance-based wages to affiliates could lead to problems such as malfeasance or damage to shareholder value. Cho Dong-geun, a professor of economics at Myongji University in South Korea, said, “It is better to use performance-based pay for actual profits, and there are concerns that it could damage shareholder value.”
On the other hand, there are those who believe that the shipbuilding industry has been suffering from a serious labor shortage due to low wages, and therefore needs to raise the wage level significantly. An industry insider said, ” To solve the problem of low wage structure inherent in the shipbuilding industry, raising the performance-baesd pay rate in addition to the basic wage will also help.”
The unions of HD Hyundai Heavy Industries, HD Hyundai Mipo, and HD Hyundai Samho plan to demand a base pay increase of KRW 159,800 (about $114.53) in this year’s labor negotiations, excluding a fixed raise of KRW 35,000; and the union of HD Hyundai Heavy Industries is asking for an upward adjustment of the home return fee, from KRW 1 million (about $716.74) to KRW 4 million per year (about $3,583.70), along with an increase in family allowances.
If all the salary increases are added together, it will increase by about 10 million won (about 7,167.39 U.S. dollars) per year. In addition, the union is demanding the recruitment of new full-time domestic workers, the extension of the retirement age, the abolition of the peak-wage system and better treatment for subcontracted workers.
With the HD KSOE’s Labor Negotiations, the Korean shipbuilding industry is expected to formally launch the “Spring Investment” activities, and HD Hyundai Heavy Industries said, “Joint negotiations that do not take into account the specific conditions of each company will not adequately reflect the needs of the workers of each company. We will do our best to ensure that future negotiations go smoothly.”