"Only 4 Companies Face Additional 3 Trillion Won Cost When Switching to Regular Employment"... Companies Fear Direct Hiring

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[Asia Economy Reporter Kiho Sung] Companies are expressing serious concerns over the Supreme Court ruling that POSCO must directly employ 59 subcontractor workers at POSCO. The reason major manufacturing companies are trembling over similar lawsuits is due to the enormous labor costs involved. It is estimated that if all four major companies currently facing direct employment lawsuits lose, labor costs alone could approach 3 trillion won. There are concerns that if additional follow-up lawsuits continue amid the global economic downturn, it could deal a fatal blow to companies.

According to the related industry on the 31st, the Supreme Court's Third Division (Presiding Justices Cheolsang Ahn and Heunggu Lee) on the 28th upheld the lower court ruling in favor of the plaintiffs in a lawsuit filed by 59 subcontractor employees at POSCO Gwangyang Steelworks against POSCO, stating that "the primary contractor has an obligation to directly employ."

However, concerns are growing as similar lawsuits remain in succession. Hyundai Motor, Kia, POSCO, Hyundai Steel, and Korea GM are all awaiting Supreme Court rulings in lawsuits seeking confirmation of worker status that require direct employment of non-regular workers. If all four major companies?Hyundai Motor, Kia, POSCO, and Hyundai Steel?lose the direct employment lawsuits, it is estimated that they will have to pay nearly 3 trillion won annually in costs.

The scale of non-regular workers claimed by each company's labor union is largest at POSCO with 18,000 employees, followed by Hyundai Steel with 7,000, Hyundai Motor with 2,000 to 3,000, and Kia with 800 to 900. Based on last year's average annual salary per person for each company, the estimated labor costs are ▲POSCO 1.962 trillion won ▲Hyundai Steel 665 billion won ▲Hyundai Motor 240 billion won ▲Kia 85.9 billion won, totaling 2.9529 trillion won. For the entire industry, these costs are expected to snowball.

In fact, Hyundai Motor experienced a major change in 2010 when the Supreme Court ruled in favor of production workers employed by in-house subcontractors, ordering Hyundai Motor to directly employ them. This was the first case where in-house subcontracted dispatched labor was deemed illegal. Subsequently, Hyundai Motor directly employed 4,000 workers by 2015, 1,400 in 2016, 600 in 2017, totaling 9,179 by 2020.

During this process, Hyundai Motor's labor costs and other expenses increased significantly. Assuming an annual salary of 94 million won per employee (based on 2012), it is estimated that Hyundai Motor has paid nearly 863 billion won solely for direct employment. Considering bonuses, welfare, and settlement fees arising from lawsuits, the total cost is expected to approach 1 trillion won.

The business community points out that while the financial losses for companies are problematic, the court rulings create a structure where other workers suffer. Last year at Hyundai Steel, conflicts arose among labor unions over the direct employment of subcontractor workers. Members of the Korean Confederation of Trade Unions opposed the hiring method for non-regular workers, while members of the Federation of Korean Trade Unions accepted the hiring. Additionally, regular workers who entered through competition voiced concerns that hiring under the same conditions was unfair. Due to this, when the Hyundai Steel non-regular branch occupied the control center, employees issued a statement demanding their departure.

There are also concerns that South Korea applies overly strict standards to manufacturing dispatch work compared to global norms. Domestic dispatch laws prohibit dispatch in manufacturing and limit it to 32 types of work considering specialized knowledge, skills, and nature of tasks. The dispatch period is also limited to a maximum of two years. Unlike South Korea, major advanced countries such as Germany, Japan, the UK, and the US allow dispatch labor in virtually all tasks, including manufacturing. Jongseon Hong, head of the Labor Standards Policy Team at the Korea Employers Federation, pointed out, "Germany and Japan recognize subcontracting and contracting themselves to enhance industrial competitiveness," adding, "Our judgment criteria are stricter compared to advanced countries, so more flexible judgment is needed."

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