KEF's advice to block performance bonus talks is outdated

The Korea Employers Federation (KEF) has issued a directive to its member companies, advising them to refuse union negotiations concerning performance-based bonuses. This move comes as performance pay disputes, initially highlighted by Samsung Electronics and SK Hynix, begin to spread to other major corporations.

The KEF's special recommendation, distributed on May 31, asserts that "companies have no legal obligation to comply with union demands for profit sharing." It references a Supreme Court ruling from January concerning Samsung Electronics, which classified performance-based incentives tied to operating profit as non-wage compensation, therefore not subject to collective bargaining. The federation argues that such payments are not wages and thus fall outside the scope of union negotiation.

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companies have no legal obligation to comply with union demands for profit sharing.

However, this interpretation is contested. While the Supreme Court did rule that certain performance incentives might not be considered wages, it did not definitively exclude all performance bonuses from collective bargaining. Labor law experts and unions argue that the eligibility of performance bonuses for negotiation should be considered separately. For years, many South Korean companies have maintained wage systems that suppress base pay increases while emphasizing performance bonuses, making these bonuses a significant portion of workers' income and a logical subject for negotiation.

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The KEF's position disregards the reality of numerous companies where performance bonuses, welfare benefits, stock options, and other profit-sharing schemes are managed through labor-management agreements.

Labor unions have strongly criticized the KEF's stance. The Federation of Korean Trade Unions (FKTU) stated that the KEF's position disregards the reality of numerous companies where performance bonuses, welfare benefits, stock options, and other profit-sharing schemes are managed through labor-management agreements. An official from the Ministry of Employment and Labor also commented that performance bonuses have historically been a subject of negotiation. The article emphasizes that corporate success is impossible without employee contributions, and performance bonuses serve as both compensation and an incentive for increased productivity, citing international examples like Germany's co-determination system and profit-sharing schemes in France and the US.

The KEF is urged to abandon its confrontational approach and instead focus on facilitating the development of reasonable standards for companies to share their profits fairly with employees, especially as the annual wage negotiation season approaches. The federation's current recommendation is seen by many as an outdated attempt to provoke labor disputes rather than foster constructive dialogue.

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Existing performance bonuses have been negotiated.