Overview of 2013 collective bargaining
Recently, industrial relations in Korea have been unstable due to pro-labor political promises during the general and presidential election campaigns in 2012, as well as the politicization of many labor issues. This can be evidenced by two things: more businessmen summoned as witnesses to the National Assembly’s Environment & Labor Committee (14 in 2011, 27 in 2012); and the increased number of labor disputes (65 in 2011, 105 in 2012).
This year, unfavorable economic conditions are expected to continue at home and abroad such as the financial crisis in the US and Europe, coupled with weak domestic demand, and slowing exports. The shaky nature of industrial relations in Korea is likely to add more uncertainty to business environment and the national economy.
There is growing concern in Korea that collective bargaining in 2013 might end in deadlock as labor demands excessive wage hike and benefits at the negotiating table, and raises the same labor issues discussed during the general and presidental election campaigns in 2012.
In these challenging times, labor and business must both make concessions in collective bargaining. However, it is not possible at the moment to expect that labor will see this necessity. Even worse, labor has officially urged affiliated unions to fix the idea of “Let the company grow first, then the workers can enjoy the fruit.”
In accordance with economic logic, but not with political logic, workers can receive job security in return for stabilization of wages. In addition to this, labor and management need to work together towards a mature culture of ‘co-prosperity’ and a ‘win-win’ relationship at the workplace to enhance Korea’s business competitiveness. With this in mind, employers need to look carefully at the following issues and guidelines for successful collective bargaining in 2013.
Major issues and guidelines for collective bargaining in 2013
Issue I. Multiple unions system
Multiple unions at the enterprise level were allowed in July 2011, and a total of 1,020 new trade unions had been established by the end of November 2012. By type, 616 unions (60.4%) separated themselves from existing unions while 322 unions (31.6%) were formed at workplaces without unions. In contrast to early concerns, workplaces have not become crowded with new trade unions, although new ones are being established on a steady basis. Employers would be wise to keep an eye on trade union moves.
If more than one trade union exists at a workplace, the employer needs to observe the principle of ‘One workplace, One negotiation, One collective bargaining agreement’. Korean labor law requires that unions present a unified bargaining channel for collective bargaining to prevent the waste of time and money that comes from overlapping collective bargaining, fierce competition between labor unions, and union complaints about unfair labor practices such as discriminatory treatment between unions. A unified bargaining channel is the most efficient way to conclude collective bargaining at workplaces with more than one trade union.
Employers should refuse any demand from unions which may infringe on the right of the bargaining representative union to represent all unions at the workplace, and thereby ruin the purpose behind unifying the bargaining channel by arbitrarily changing the bargaining representative union. Employers should firmly deal with all illegal labor disputes according to law and the company regulations.
If it is not possible to unify the bargaining channel for collective bargaining, the employer can apply to the Labor Relations Commission (LRC) to divide the bargaining units for two or more collective agreements. However, the employer needs to be careful when making such requests as once the LRC divides the bargaining unit in consideration of such factors as differences in working conditions, employment status, and type of work, it is difficult to reverse the decision again.
It has been nearly 2 years since the multiple unions system was implemented in Korea. For now, issues regarding bargaining unit or bargaining representative union have finished while disputes over the bargaining representative union’s duty to fairly represent and over unfair labor practices are expected to persist for a while. According to the Ministry of Employment & Labor (MOEL) and LRC interpretations, unfair representation by the bargaining representative union, if it is for justifiable reasons, is not illegal.
Issue II. Time-off system
Given that many enterprises plan to resume their discussions over time-off for full-time union officers and the Time-off System Deliberation Committee is also to review current time-off limit this year, adjustment of the paid time-off limit for full-time union officers is likely to emerge as a controversial issue. In particular, labor has been demanding raising the paid time-off limit for full-time union officers, applying paid time-off to the dispatched union officers to upper-level unions, providing broader coverage of paid time-off for union activities, and guaranteeing freedom of union activities falling under the time-off system. Also, labor is also likely to express its view after watching the discussion of the Time-off System Deliberation Committee. Under these circumstances, negotiation on this matter will not be easily concluded at the bargaining table.
In fact, the time-off system is not an alternative measure to paying full-time union officers. Rather, it is a way of cushioning the impact of the legal ban on such payment. Given the purpose of the time-off system, it is unreasonable for unions to make excessive demands for ‘time-off’. Rather, the current time-off limit for full-time union officers needs to decrease. Also, according to the actual meaning of ‘time-off’, labor activities and the time allowed under the time-off system should be reasonable.
If the time-off system is implemented at a workplace, the employer is advised to not allow additional full-time union officers or excessive paid labor activities. In particular, the employer should remember that payment of wages to full-time union officers through wage increases, allowing paid time-off for union officer activities in various committees, negligence of administration, and allowing unions to have profitable businesses, etc., are all unfair labor practices according to labor law.
Issue III. Non-regular workers & in-house subcontract workers
The government and politicians have recently been stepping up their efforts to address discrimination against non-regular workers and convert more non-regular workers to regular status. Riding on the current social atmosphere, labor has been making stronger demands for limiting the use of non-regular workers and obligating employers to give non-regular workers regular job status after a certain period of employment. Of particular note, labor is seeking to include in-house subcontract workers not directly employed by the prime contractor employer in the non-regular worker category.
Non-regular work is one of employment types which can be used to address the needs of workers as well as the needs of business. Given that 95% of non-regular workers are employed at small and medium-sized enterprises, an unreasonable and sudden conversion of non-regular workers to regular workers will have such adverse effects as job losses.
In-house subcontracting is also used to benefit production, and is permitted in most advanced countries. Considering that worker dispatch in Korea is regulated more strictly than other countries, further restrictions on in-house subcontract workers would seriously impede employment flexibility and thereby corporate competitiveness in Korea. Thus, employers need to make it clear that union demands to restrict the use of non-regular workers and in-house subcontract workers are not the subject of collective bargaining. If the union insists on discussing this matter in collective bargaining, the employer should refuse.
Meanwhile, as the new government is endeavoring to improve the quality of jobs, employers should exercise caution when using non-regular workers and in-house subcontract workers. To prevent misunderstanding and conflict over discrimination against non-regular workers and illegal dispatch of in-house subcontract workers, the employer needs to keep a close watch on its management of non-regular workers and ensure the independence of subcontractor personnel management and managerial independence as well. The employer should also pay more attention to engaging the trade union to understand the needs for non-regular and in-house subcontract workers through establishment of cooperative labor-management culture.
Issue IV. Reduction of working hours
In recent years, the effort to reduce the working hours in Korea has been a very important labor issue. In 2012, Korea recorded the longest working hours among OECD member countries, as Korean wage workers worked an average of 2,090 hours annually. In 2012, labor, management and the government reached an agreement to reduce the annual working hours to 1,800 by 2020. However, this is no easy task, and requires concerted efforts from labor and management. First, workers need to increase their relatively low labor productivity (which remains around 70% of the OECD average) and understand their wages may be cut in return for shorter working hours.
Second, based on flexible personnel management at workplace, enterprises need to expand their investment for more job creation. As the government has recently announced that it would pursue labor law revision to include holiday working hours in ‘extended work’ and reduce the number of businesses exempt from the statutory working-hour requirements, labor has increased its demands to reduce working hours. The problem is that workers seem to have no willingness to make any concessions for the benefit of shorter working hours. As an example, the Korea Metal Workers’ Union, affiliated with the Korean Confederation of Trade Unions, is stressing that it will maintain its ‘no wage loss, no more work, no job insecurity’ principle.
The government is likely to continue its efforts to reduce working hours through revision of related policies and administration. Thus, in preparation for sudden legal revision, employers are advised to develop their own measures to improve productivity and competitiveness. For example, in the collective bargaining agreement, inclusion of provisions such as ‘personnel reshuffle or changes to facilities require prior agreement or consultation with the union’ may erode corporate productivity and thus such provisions should be improved. Employers are also advised to introduce flexible or selective working hour systems at the workplace. By adjusting employee working hours according to workload, employers can avoid extra costs.
Issue V. Ordinary wage
A recent judicial decision that regularly paid bonuses can be included in ordinary wage has resulted in labor aggressively seeking expansion of the scope of ordinary wage through individual lawsuits and collective bargaining. For example, the National Health & Medical Workers’ Union, affiliated with the Korean Confederation of Trade Unions, plans to hold intensive discussions on ‘ordinary wage’ in collective bargaining this year. Besides, labor has been strategically filing lawsuits against OO Airline Company and OO Motor Company over ordinary wage.
However, the ruling that regularly paid bonuses shall be considered as ordinary wage can not apply to all workplaces in Korea. So far, the Ministry of Employment & Labor has been stipulating that regular bonuses be excluded from the realm of ordinary wages even if they are paid regularly. Also, given that ordinary wage is used as the standard wage to calculate overtime pay for extended work and holiday work, it would be more appropriate to consider as ordinary wage something that is paid in a certain period of time (a unit period of wage payment).
In dealing with recent judicial rulings on the scope of ordinary wage, employers are advised to improve their wage systems. In collective bargaining, provisions regarding regularly paid bonuses and other allowances which might be misinterpreted as fixed wage should be revised. Also, if labor costs increase by including non-ordinary wages in the calculation of an ordinary wage, the employer should resolve these through lower wage increases and fewer benefits at the collective bargaining table.
Issue VI. Extension of retirement age
As baby boomers (those born between 1955 and 1963) begin to retire, labor increasingly demands that the current retirement age be extended, where previously, labor had wanted job security for senior workers. Politicians are trying to revise related labor laws to fix the statutory retirement age at 60 on the grounds that average life expectancy and therefore average working age, is increasing in Korea. On the other hand, enterprises remain cautious and have not yet adjusted their retirement age due to the inflexibility of the labor market and prevalence of seniority-based wage systems.
In Korea where the average retirement age is 57 in private sector, if the retirement age is forcefully raised at corporations, it is inevitable that those corporations will scale down their recruiting plans or cut their existing labor expenses. In Japan, the statutory retirement age was fixed at 60 in 1998 when 93.3% of Japan corporate had already set their retirement age at 60. Contrary to the Japanese situation, only 22.2% of Korean companies have their retirement age set at 60.
Regarding extension of the retirement age, employers should fully consider the balance between supply of and demand for the labor force on a medium-and long-term basis as well as present business conditions. Employers also need to spare no effort in improving their wage systems and stabilizing wages according to labor productivity. These days, what employers should remember is the phrase ‘paradox of paradigms.’ If farmers maximize the number of cows to get more milk, regardless of the size of the farm, they will not maximize the output, but rather, are likely to kill the cows. The same goes for the national economy and business.
If labor continues to make such excessive demands as a sudden reform of law and system or collective bargaining, it will seriously harm national and corporate competitiveness as well as workers themselves. In collective bargaining for 2013, both labor and management are advised to make reasonable agreements for the sake of their corporate future for the next 5 or 10 years, and not simply focus on immediate gains.