[Aftermath of the Wage Peak System] "Ready to Sue" Labor's Offensive Puts Companies on Edge... Concerns Over Generational and Labor-Labor Conflicts

Samsung, SK and Other Large Corporations' Unions Demand Abolition of Implicit Union System
Emerging as a Key Issue in Collective Bargaining... Concerns Over Labor-Management Conflict
Sharp Confrontation Causes Distress for Both Employers and Workers

On the 8th, officials from the Public Institution Business Headquarters held a press conference in front of the Presidential Office in Yongsan-gu, Seoul, urging the abolition of the wage peak system guidelines and demanding labor-management negotiations. Photo by Jinhyung Kang aymsdream@

The industrial sector is being swept by a fierce backlash following the Supreme Court ruling that declared the implementation of the "wage peak system," which cuts wages solely based on age without "reasonable grounds," invalid. Major labor unions of large corporations, including Samsung, SK, and Hyundai Motor Group?where unions hold significant influence?have consecutively demanded the abolition of the wage peak system from their companies and have even threatened litigation. For companies that have yet to finalize their wage collective bargaining agreements (Wage CBAs), this issue has emerged as a core point of contention, igniting labor-management conflicts. Calls are growing for the government to urgently establish "guidelines" to minimize social turmoil.

◆ Labor demands abolition of wage peak system... thorny path for wage CBAs = According to the business community on the 10th, the Samsung Electronics Labor Union's joint bargaining group sent an official letter on the 3rd to Samsung Electronics Vice Chairman Han Jong-hee and President Kyung Kye-hyun, inquiring about the company's stance on the wage peak system.

In the letter, the union pointed out the recent Supreme Court ruling and stated, "The company operates the wage peak system solely based on age without changes in work type or duties, which is clear discrimination; therefore, we demand its abolition." They also demanded monetary compensation for damages caused by the unreasonable operation of the wage peak system and warned that if compensation is not provided, they will hold the company accountable through "litigation." The company responded by stating that the wage peak system was decided as a reasonable and just method in the form of retirement age extension and intends to maintain the system.

Samsung Electronics introduced the wage peak system in 2014 when it extended the retirement age to 60. Initially, the system reduced wages by 10% annually starting at age 55 compared to the previous year's salary, but later the application age was extended to 57, and the wage reduction rate was lowered to 5%. A Samsung Electronics official explained, "The retirement age was extended, and the reduction rate was lowered, improving conditions favorably for employees," adding, "Especially, the wage peak system case pointed out by the Supreme Court is a retirement age maintenance type, so it is unrelated to Samsung Electronics' retirement age extension type."

Other major corporate unions have also demanded the abolition of the wage peak system, including it in this year's collective bargaining demands or separately requesting it from management.

Since extending the retirement age to 60 in 2015, SK Hynix's union, which applies the wage peak system from age 58, as well as unions in the finished vehicle industry such as Hyundai Motor, Kia, and Renault Korea, have called for the abolition of the wage peak system. Hyundai Motor and Kia include employees from age 59; wages are frozen in the first year, and at the retirement age of 60, wages decrease by 10% compared to before. Hyundai Motor and Kia unions argue that the retirement age should be extended in connection with the National Pension receipt age. Renault Korea's union, which includes employees from age 54 in the wage peak system, also included abolition of the system in their collective bargaining demands.

In heavy chemical industries such as POSCO, labor-management conflicts over the related system are intense. The POSCO branch of the Korean Metal Workers' Union under the Korean Confederation of Trade Unions (KCTU) is recruiting plaintiffs for a lawsuit to invalidate the wage peak system. The Hyundai Steel union has been occupying the Dangjin Steelworks president's office for over a month since the 2nd of last month, demanding the payment of a special incentive of 4 million won, which Hyundai Motor, Kia, and Hyundai Mobis have paid.

◆ Severe impact on mid-sized companies... another axis of labor-management conflict = Mid-sized companies are also facing a strong backlash from the wage peak system. The mid-sized business community is concerned about confusion at workplaces that have introduced the wage peak system. The common perception in the industry is that ongoing litigation could escalate labor-management conflicts.

Park Yang-gyun, head of policy at the Korea Federation of SMEs (K SME Federation), said, "In the industrial field, the court ruling is accepted as indicating a problem with the wage peak system itself," adding, "Unions will raise this as an issue in wage negotiations, which will lead to labor-management conflicts."

The industry believes that although the Supreme Court ruling is limited to the "retirement age maintenance type" among many types of wage peak systems, conflicts could arise regardless of the type in the future. Park said, "Companies introduced this system based on government guidelines, but if lawsuits are filed claiming unfairness even in companies that have applied it so far, the risk and burden of litigation increase from the company's perspective."

Major companies are also expressing concerns. For example, Samsung Electronics, which recently had ongoing conflicts with its union during wage negotiations, is highly likely to see the wage peak system issue become another axis of labor-management conflict.

Some analysts argue that the retirement age extension type wage peak system does not constitute age discrimination criticized by the Supreme Court, so its impact will be limited. A significant number of domestic large corporations, including Samsung Electronics and Hyundai Motor, have adopted the "retirement age extension type wage peak system." An industry insider said, "Economic organizations are discussing countermeasures related to the Supreme Court's wage peak system ruling," adding, "There is concern that the union's strong demands to nullify even lawful wage peak systems could spark labor-management conflicts."

◆ Another potential flashpoint: generational and labor-labor conflicts = According to the Labor Standards Act, changing the wage peak system rules requires the consent of a majority labor union or a majority of workers. During the revision process, generational and labor-labor conflicts may arise among members. Older workers, who feel they have contributed enough to the company, may face wage cuts, while many younger workers may sympathize with the revisions. Many younger workers, who are not subject to the wage peak system, may argue that there is no problem with the company reducing wages of eligible employees "according to principles." This could lead to repercussions similar to the "Incheon International Airport (In-guk-gong) incident," a representative case of labor-labor conflict that caused major turmoil over the "regularization of non-regular workers." Such conflicts could erupt in various companies. Unlike wage collective bargaining or lawsuits that are resolved in court and publicly reported in the media, this is an invisible internal organizational conflict that grows, making it difficult to find solutions. Ultimately, both management and workers are likely to suffer silently.

This content was produced with the assistance of AI translation services.