The shipbuilding industry is entering this year’s wage and collective bargaining negotiations carrying the long-standing challenges of performance-based profit-sharing tied to improved results and the restructuring of relations between prime contractors, subcontractors, labor, and management. Beyond a simple wage increase, the question of sharing operating profits and whether primary contractors should be recognized as employers are emerging as the central issues, with fierce confrontations between labor and management widely anticipated.

The Hyundai Heavy Industries branch of the Korean Metal Workers’ Union will formally launch negotiations by delivering its “2024 Integrated Collective Bargaining Demands” to management on May 20. The core of the demands includes base salary increases and expanded bonuses, along with the distribution of at least 30% of the company’s operating profit as performance bonuses to both prime contractor and subcontractor workers. This marks the first time the union has presented a specific profit-sharing ratio tied to operating income, and is interpreted as a clear expression of intent to directly share the fruits of the shipbuilding boom with workers on the ground.

The union has been emphasizing that the recent recovery in shipbuilding performance was built upon the intense labor and expanded production of frontline workers. In fact, major domestic shipbuilders are rapidly recovering profitability through a selective order strategy centered on high-value-added vessels such as liquefied natural gas (LNG) carriers. The broader social climate — marked by spreading disputes over performance bonus calculation standards at major conglomerates such as Samsung Electronics — also appears to be lending further momentum to the demands of shipbuilding industry unions.

Management, on the other hand, has expressed reluctance toward fixing a set percentage of operating profit as performance bonuses. This is rooted in the shipbuilding industry’s structural characteristics, including a significant time lag between the point of order intake and revenue recognition, as well as extreme cyclical volatility. The prevailing view is that introducing a fixed profit-sharing structure could add substantially to management burdens at a time when large-scale investment in future competitiveness — including eco-friendly vessel technology development and smart shipyard construction — is urgently needed.

The question of bargaining responsibility between prime and subcontractors is another flashpoint in this year’s wage and collective bargaining negotiations. The Gyeongnam Regional Labor Relations Commission recently indicated, through a ruling related to Welliv, a food service contractor at Hanwha Ocean, that employers must not arbitrarily reduce or modify the content of bargaining demands. This has drawn considerable industry attention, as it is being interpreted to mean that bargaining obligations may arise when a prime contractor exercises substantial influence over the working conditions of subcontracted workers.

The Gyeongnam Regional Labor Relations Commission withheld judgment on the most contentious issue — whether the prime contractor qualifies as an employer — citing concerns over the risk of prolonged legal disputes. However, it left room for future discussion by explicitly noting that if there is a possibility of employer status being recognized with respect to certain working conditions, the company bears an obligation to respond to bargaining demands. Given the high proportion of in-house subcontractors in the shipbuilding industry’s structure, this ruling is expected to further intensify debate over the scope of future collective bargaining and the structure of prime contractor responsibility.

Hanwha Ocean is maintaining a cautious stance, holding to the position that the commission did not directly recognize the company itself as an employer. The company plans to review the legal issues raised in the ruling and assess its potential ripple effects before deciding whether to file for reexamination. An industry insider predicted, “This year’s wage and collective bargaining negotiations are entangled with both profit-sharing and the structural issues between prime and subcontractors, and will unfold in a far more complex manner than in previous years.”
Source: Business Korea