As the shipbuilding industry escapes a long-term recession and enters a supercycle, labor-management conflicts surrounding performance distribution are also escalating in earnest.

According to the industry on June 22, following the HD Hyundai Heavy Industries labor union’s demand for the distribution of 30% of operating profits as performance bonuses, the recent recognition of Hanwha Ocean’s principal employer status has further heightened tension within the industry ahead of this year’s wage and collective agreement negotiations. Concerns are emerging that production disruptions will be inevitable if large-scale performance bonus payments and even strikes materialize.

Labor and management at HD Hyundai Heavy Industries held a kickoff meeting at the Ulsan headquarters on June 2 and became the first to initiate wage and collective agreement negotiations. In its demands this year, the union included an increase in the monthly basic pay of 149,600 won (about $99) excluding regular step increases, an additional 100% increase in bonuses, a performance distribution of 30% of operating profits, and a contribution of 2 billion won ($1.3 million) in ordinary expenses to maintain the operation of recreational facilities. This marks the first time the union has demanded that 30% of operating profits be distributed as performance bonuses.

The gap in positions between labor and management over these unprecedented demands remains unbridgeable. The company maintains the position that large-scale performance bonus payments could act as a burden on facility investments and the securing of future competitiveness. In reality, the scale of performance bonuses applying the union’s demands amounts to approximately 610 billion won based on last year’s operating profit of 2.0375 trillion won. Based on this year’s operating profit forecast of 3 trillion won, it is projected to exceed 1 trillion won.

The improvement of the performance bonus system is also expected to emerge as a major contentious issue in the wage and collective agreement negotiations at Hanwha Ocean and Samsung Heavy Industries. Hanwha Ocean held a kickoff meeting for wage and collective agreement negotiations on June 4 and initiated bargaining, and Samsung Heavy Industries is also scheduled to begin negotiations at the end of April.

The impact of the Yellow Envelope Law (amendment to the Trade Union and Labor Relations Adjustment Act) is also cited as a variable in this year’s wage and collective agreement negotiations. The National Labor Relations Commission dismissed the application for reexamination filed by Hanwha Ocean on June 15 and recognized its status as the principal employer for the Welliv branch, which handles catering and facility management duties. This decision recognized the principal contractor’s practical dominance on the grounds that improvements to aging facilities within the workplace, such as kitchens, laundry rooms, and commuter buses, cannot be achieved without the cooperation of Hanwha Ocean.

With this decision, Hanwha Ocean is now in a situation where it must also negotiate with in-house subcontracting unions unrelated to ship production. As the Welliv branch has been demanding the payment of performance bonuses at the same level as principal contractor employees, there are significant concerns that demands for performance distribution could spread beyond the principal contractor to subcontractors. It is observed that similar bargaining demands will follow in succession across the overall shipbuilding industry rather than just at specific companies.

According to the 2025 Employment Type Disclosure Results by the Ministry of Employment and Labor, the indirect employment ratio of the three major domestic shipbuilding companies reaches 63%. This is a significantly higher level than the manufacturing average of 18%, as well as the construction industry in second place at 44.3%. As the subcontracting unions’ demands for equal performance bonuses expand, the management burden on shipbuilding companies will inevitably increase correspondingly.

There are assessments that this could also become an obstacle to securing future competitiveness. The shipbuilding industry is a representative cyclical industry, making investments in preparation for the next recession crucial even during boom periods. While automation facilities and the expansion of production capacity for the transition to smart shipyards are necessary, it is pointed out that the investment capacity of companies could be constrained by increased labor costs.

If labor-management conflicts become prolonged and lead to strikes, disruptions to ship construction and delivery schedules are expected to be inevitable. While Chinese shipbuilding companies are expanding their market share by putting forward rapid deliveries, delivery delays could exert a negative influence on the competitiveness and external credibility of the domestic shipbuilding industry.

A shipbuilding industry official stated, “The fact that principal contractors and subcontractors are engaging in a joint struggle this year is the biggest difference from past wage and collective agreement negotiations,” and added, “It could become the greatest contentious issue in the bargaining process and a factor that prolongs the negotiations.” The official further noted, “If principal contractors and subcontractors jointly demand performance bonuses, new conflicts could arise over what percentage of operating profits to distribute and how to divide the share between the principal contractor and the subcontractors.”

Source:Business Korea