Kia halts hiring amid growing labor risks
Kia Motors headquarters in Yangjae-dong, Seoul / Yonhap
By Nam Hyun-woo
Kia Motors has decided to stop hiring new workers for its plants, a move seen as fallout from its deteriorating bottom line and its increasingly uneasy labor-management relations.
Industry analysts said Monday the carmaker may face tens of billions of additional labor costs depending on an appeals court ruling on calculating the ordinary wages of Kia Motors employees, saying that the company may not continue hiring plant workers.
According to Kia Motors, it has halted job offers at its multiple plants across the country. The hiring sessions, which were planned to hire more workers for each plant, had been in progress since late last year, but all of them were halted without additional future plans.
“The decision came amid an aggravated management environment,” a Kia Motors official said. “Nothing has been determined so far over what to do with those halted job offerings.”
Not only Kia Motors but also other automakers in Korea saw weakened earnings last year amid the worldwide car market slowdown. Adding an additional burden for them is increasing labor costs, stemming from the country's steep hike in statutory minimum wage and strengthened rules for calculating it.
Kia Motors employees' average gross annual salary hovers over 93 million won, but more than 1,000 employees are receiving less than the minimum wage standard this year, due to the company's incentive-centric salary structure and last year's change in minimum wage rules.
To address this, Kia Motors management suggested the union accept two plans on converting a significant portion of incentives into ordinary wages, which are standard criteria for calculating the minimum wage, but the union has turned down the suggestion, saying those plans are “not even worth thinking about.”
The union rejected the suggestion because it can keep the incentive static while demanding for an additional rise in their ordinary wage. Since Kia Motors is in a six-month grace period before it will be punished for violating the minimum wage law, time is on the union's side.
As a stalemate continues, Choi Jun-young, Kia Motors senior vice president for human resources, issued a statement last week asking for the union's cooperation.
“Kia Motors' operating margin remained at 2.1 percent last year,” Choi said in the statement. “I ask for the union's cooperation for the company to cut expenses and improve its earning structure.”
In this August 2017 file photo, Kia Motors union members and their lawyers walk out of a Seoul court after the court made a decision forcing the company to pay them more than 400 billion won in unpaid salaries. The Seoul High Court will rule on Kia Motors' appeal to the decision on Friday. Korea Times photo by Shin Sang-soon
Another concern for Kia Motors is the looming court ruling on a legal battle against the union over ordinary wage.
In 2011, more than 27,000 Kia Motors union members have filed a charge with a domestic court demanding the company to pay more than 1 trillion won in unpaid salary.
At the time, they claimed their ordinary wages should include regular incentives and meal costs, and the court in 2017 acknowledged a part of their claim, ordering Kia Motors to pay 422.3 billion.
Kia Motors set aside 977.3 billion won as provisions for the loss, and appealed to the Seoul High Court, which will announce its ruling on Friday.
“If Kia loses in the appeals ruling, its labor cost will deal a heavy blow to its earnings,” an industry official said. “With this year's outlook for the car market stays negative, a stalemate in the company's labor conflict may end up slowing its performances further.”