The South Korean government has established guidelines indicating that performance bonuses linked to corporate profits, known as 'N% performance bonuses,' as well as major management decisions such as the introduction of artificial intelligence (AI) and factory relocations, are generally not considered mandatory subjects for negotiation. However, changes in working conditions, such as layoffs or job reassignments, may become negotiable if they are clearly defined.
On September 3, the Ministry of Employment and Labor announced the 'Guidelines on Labor Disputes Related to Management Performance Bonuses.' This document clarifies the criteria for assessing performance bonuses and management decisions based on the interpretation of the amended Labor Union Act (yellow envelope law) released in February.
According to the guidelines, management performance bonuses that pertain to wages and benefits are generally subject to mandatory negotiation. However, demands for performance bonuses tied to corporate profits, such as sales revenue, operating profit, and net income, are not considered mandatory subjects for negotiation or dispute resolution. This is due to the fact that corporate profits are often allocated to research and development (R&D), capital investment, and dividends, which also involve the interests of shareholders and creditors.
Nonetheless, N% performance bonuses can still be negotiated voluntarily between labor and management, and existing collective agreements remain valid under these guidelines. Requests for fixed performance bonuses or bonuses based on base salary that are not linked to corporate profits may also be subjects for negotiation.
Decisions regarding the establishment or relocation of factories, corporate sales, and the introduction of new technologies like AI are not mandatory subjects for negotiation. However, if plans for layoffs, restructuring, or changes in job roles and work arrangements are objectively confirmed, those related working conditions may become negotiable.
If a union applies for mediation of a labor dispute solely to enforce N% performance bonuses or management decisions, the Labor Relations Commission may recommend changes to the demands. If the union does not comply, the commission can provide administrative guidance on that aspect.
Kim Young-hoon, Minister of Employment and Labor, stated, "These guidelines were created to enhance predictability in the workplace and prevent labor disputes. We will respect voluntary negotiations between labor and management while consistently interpreting and applying the law according to these guidelines."
* This article has been translated by AI.
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