[Exclusive] Hyundai Motor Labor-Management Research Staff Wage Restructuring Negotiations Fail... Union "Cannot Give Up Seniority System"

The labor and management of Hyundai Motor Company have failed to reach an agreement on the restructuring of the research staff wage system, which was scheduled to be completed by March this year. Since November last year, both sides have formed a task force (TF) to discuss the wage system reform. However, they only confirmed their differences over the abolition of the seniority-based pay system.

According to a compilation of reports on the 3rd, Hyundai Motor’s labor and management ended negotiations without any significant progress during the final meeting of the 'Research Staff Wage System Improvement Labor-Management TF' on the 28th of last month, failing to narrow their differences. At the launch of the TF, both sides pledged to present a tangible reform plan by March this year. In the negotiations, the management insisted on abolishing the seniority-based pay system for research staff at the employee and assistant manager levels, but the union opposed the abolition.

The management argues that to secure outstanding software (SW) talent, the seniority-based pay system must be abolished for low-experience research and development personnel. They reason that it is inevitable to compete with industries such as IT and electronics, which offer high salaries in the job market to attract top talent.

On the other hand, the union views the seniority-based pay system as highly stable. This conclusion comes from various analyses, including their own surveys and visits to the labor unions of SK Hynix and Naver, weighing the pros and cons of wage system reform. The abolition of the seniority-based pay system implies entering an unlimited competition system, but the union does not trust the management’s personnel evaluation system, which serves as the basis for competition. Instead, they have reportedly proposed improvement measures within the seniority-based pay system, such as increasing the starting salary for college graduates, improving the promotion rate to assistant manager, and adjusting research allowances to reflect reality.

Hyundai Motor labor and management sitting face to face
[Photo by Yonhap News]

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The abolition of the seniority-based pay system does not necessarily mean the introduction of a performance-based annual salary system. There is a performance-based annual salary system that offers wages proportional to performance, a competency-based pay system that determines wages according to job ability or skill level, and a job-based pay system that varies wages depending on the difficulty of the job or task.

Recently, the Yoon Suk-yeol administration is reportedly considering providing incentives to companies that reform their wage systems to focus on job and performance. This approach aligns with the current government’s policy emphasis on the importance of labor reform.

This is not Hyundai Motor’s first attempt to abolish the seniority-based pay system. In 2015, Hyundai Motor tried to abolish it but ultimately failed due to union opposition. Until recently, the union has been demanding strengthening the seniority-based pay system, including improvements and increases in seniority increments.

In 2021, Hyundai Motor introduced the 'Talent Reward,' a special bonus of 5 million KRW per person for research and office staff with outstanding performance. However, when the union opposed the differentiated performance pay, Hyundai Motor gave 4 million KRW to all employees the following year to conclude the matter.

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