PSI strongly calls on the South Korean government, particularly the Ministry of Economy and Finance, to immediately respect the findings of the ILO and include workers’ representatives in the process of developing Guidelines or any policy that impacts on workers.

The complaint detailed ways the South Korean Government effectively undermined collective bargaining agreements and collective bargaining rights of workers in public institutions through the Budget and Management and Innovation Guidelines, a set of standards used by the Ministry of Economy and Finance (MOEF) to measure management performance of public institutions. Unions have not been consulted in the formulation of the Guidelines, even though labour cost and other labour-related indicators are among the measures for management performance evaluations specified in the Guidelines. The Guidelines are supposedly “recommendatory” in nature and not legally-binding; however, the results of management performance evaluations based on the criteria set by the Guidelines clearly affect budgets for wages and conditions.  

Unions in South Korea highlighted multiple negative impacts of the Guidelines on workers’ pay and collective bargaining rights of unions. These include the following:  

• Limit in the total labour costs and rates of wage increases neutralised CBAs and obstructed wage increase for workers. In the case of KORAIL workers who fought hard to successfully conclude a 13.2 percent increase in wages, workers ended up receiving only 4.3% wage increase because this was the ceiling set by the Guidelines.     

• Payment of performance incentives has become highly differentiated. The guidelines determine much of the rules in payment of performance incentives.  

• The replacement of seniority-based pay system by a skill-based wage system, a major policy shift that affects workers’ pay across public institutions, was included in the Guidelines without any consultations with labour at the Central level.    

• Introduction of wage peaks, a system wherein employee’s wage can be reduced at a pre-defined rate once the wage ceiling is reached to extend the retirement age, has disadvantaged workers as it effectively slashed workers’ wages by 23% in 2018 with a cumulative rate of wage loss amounting to 56.7% for 2.5 years.  

Despite strong opposition to these policies, unions, and even employers at times, are forced to incorporate these into their agreements to avoid losing points in the performance management evaluations of the public institutions.   

In its response to the union complaints, the Korean Government has reasoned that the Guidelines are not legally binding; it serves only as "internal recommendations to the investee” and that the management performance evaluation “only concerns internal supervision by the Government” and therefore does not require prior consultation with the union.  

However, it is clear the management performance evaluation are designed to reduce wages and increase workload. The Guidelines effectively hold employers and unions hostage to the “power of the purse” that the Government and MOEF exercises over public institutions. As the ILO CFA found, the Guidelines may be “legally soft,” but they are "practically [an] effective framework for collective bargaining at the individual institution level".   

The absence of social dialogue in formulating these Guidelines is a clear violation of ILO standards. The Guidelines clearly cover criteria relating to labour-costs (i.e. wages, incentive schemes, etc.) and labour relations, in ALL public institutions.  

PSI therefore welcomes the recommendations of the ILO CFA for the government to “establish a regular consultation mechanism that would allow the full and meaningful participation of the organizations representing workers of public institutions” in the formulation of the Guidelines to “ensure that the guidelines issued at central level do not effectively interfere with collective bargaining in public institutions.” 

“The introduction of guidelines or other mechanisms to cap public sector wages and conditions has been used to undermine collective bargaining in several countries”, said Kate Lappin, Regional Secretary. “We must oppose these covert attempts to reduce workers' wages and limit union power. PSI will continue to support KPTU in the fight to have labour rights respected by the Korean Government.”  

“We call on the Korean Government to recognise the rights of unions to negotiate changes to workplace policies that impact on workers and to cease any attempts, whether it be guidelines, directives or acts of intimidation, to inhibit collective bargaining and trade union rights. We also call on the Korean Government to respond to the KPTU's request for social dialogue as the KPTU delivered a letter seeking negotiations around policies that cannot be resolved at the enterprise level, such as the guidelines,” Lappin added.