SK Innovation management and its union have come to an agreement to increase employee wages in line with the current inflation rate. This agreement is regarded as an innovative experiment amidst continuous disputes between companies and unions in Korea over wage bargaining issues.
The core agreement is that both the union and management will use the consumer price index from the previous year (CPI) as announced by Statistics Korea as reference data to decide the wage increase rate. This year, the wage increase rate will be set by adding each employee’s basic pay increase rate (2.7%, on average) to the previous year’s CPI (1%). This means that each employee’s wage increase rate is automatically decided and therefore, time-consuming wage negotiation between management and union can be avoided.
This agreement will be effective as long as the next-term unions maintain it. However, if Korea’s CPI turns negative or inflation rate change rapidly; the management and union can negotiate a wage increase rate separately.
According to a company spokesperson, “By reaching this agreement, SK Innovation has set a new paradigm for collective bargaining between management and the union, which means that we are working together to secure future competitiveness.”
Also, SK Innovation’s management and its union agreed to adjust the wage system by considering an employee’s life cycle. So far, employees’ wages go up automatically (2.7% on average) according to each employee’s seniority. Based on the new agreement, a higher wage increase rate will be applied to employees in their 30s and 40s because they have been deemed to need to earn more due to the costs of marriage and childbirth. The wages of senior workers, aged 50 and over will be lowered or frozen.
Since 2007, SK Innovation’s employees have been donating money under the ‘one employee, one donation account’ scheme. Starting next month, SK Innovation and its employees will establish the Co-prosperity Fund by collecting donations equivalent to 1% of the basic wage. If an employee donates 1% of his/her basic pay, SK Innovation will also donate the same amount of money. This fund will be used to improve employees’ welfare and support vulnerable social groups. This year, the expected amount of the donation is approximately KRW 4 billion.