Hyundai Motor Union Holds Rally to Kick Off Wage and Collective Bargaining Talks (Yonhap)
SEOUL, Sept. 29 (Korea Bizwire) — South Korea’s two largest automakers, Hyundai Motor and Kia, have agreed to broaden the scope of “ordinary wages” in their latest labor agreements, a move that could reshape labor relations and intensify cost pressures across corporate Korea.
The accords, reached earlier this month, follow a Supreme Court ruling last December that conditionally paid bonuses and allowances tied to employment status — such as holiday stipends or vacation pay — should be counted as part of ordinary wages. These wages are used as the baseline for calculating statutory allowances, including overtime and annual leave pay.
For years, companies sought to limit the scope of ordinary wages to curb labor costs, while unions pushed for expansion. The top court’s decision tilted the balance toward workers by eliminating the long-standing “fixedness” requirement, which excluded payments contingent on conditions such as being employed on a specific date.
Under the new settlements, Hyundai will include five categories — vacation pay, holiday allowances, research performance bonuses, overtime bonuses, and wage-adjustment payments — in its ordinary wage calculations. Kia reached a similar agreement covering stipends, holiday subsidies, and vacation allowances.
Hyundai Motor workers leaving work (Image courtesy of Yonhap)
The changes are likely to ripple through industry. The Korea Employers Federation estimates that including conditional bonuses in base pay could add nearly 6.8 trillion won ($5 billion) annually in labor costs — an amount equivalent to hiring more than 90,000 workers or funding yearly support for Korea’s entire pool of unemployed youth.
The Ministry of Employment and Labor has fielded a surge of inquiries from companies seeking clarity. Officials caution that even identically named benefits, such as “holiday bonuses,” may or may not qualify depending on whether they meet the requirements of regularity and universality. Ultimately, the ministry says, the determination lies with individual labor-management negotiations.
The debate has already fueled strikes and lawsuits. Seoul bus operators narrowly avoided a strike in May but remain deadlocked in fresh talks this month, while a court in Changwon recently ruled in favor of bus drivers seeking retroactive wage payments.
Judges have been skeptical of management claims that expanded wage obligations violate the legal principle of “good faith,” warning that financial hardship alone is unlikely to exempt firms from compliance.
With Hyundai and Kia setting a precedent, analysts say more firms may be forced to follow suit — deepening financial strain at a time when Korean manufacturers already face slowing global demand and rising trade barriers.
M. H. Lee (mhlee@koreabizwire.com)
