Bargaining with subcontracted workers becomes crucial for shipyards

Prime Minister Kim Min-seok, center, poses at Hanwha Ocean's Seoul office, Jan. 5, with participants in a ceremony to mark the shipbuilder's efforts to foster mutual benefits with subcontracted shipyard workers. Joint Press Corps

Potential conflicts with subcontracted workers have emerged as a major risk for Korean shipbuilders, even as the companies are expected to continue posting solid earnings this year.

The sense of crisis stems from growing political pressure on shipbuilders to treat subcontracted workers on equal footing with their directly hired employees. The forthcoming enforcement of the revised Trade Union and Labor Relations Adjustment Act, commonly known as the “yellow envelope law,” is also weighing on the industry, as it allows subcontracted workers to negotiate directly with the principal employer.

After President Lee Jae Myung commended Hanwha Ocean last month for its decision to eliminate discrimination against subcontracted workers in bonus payments, other shipbuilders have faced increasing calls to follow suit.

Hanwha Ocean said the ratio of subcontracted workers’ performance-based bonuses to their base pay will now match that of the company’s regular employees. In 2024, subcontracted workers received bonuses equal to 75 percent of their annual base salary, while directly employed staff received bonuses amounting to 150 percent.

Prime Minister Kim Min-seok praised Hanwha Ocean’s decision again on Jan. 5 when he visited the company’s Seoul office.

“The government will continue providing administrative and financial support so that the shipbuilding industry’s efforts to foster mutual growth with subcontracted workers can spread to other sectors,” Kim said.

Both the ruling and opposition parties have urged other shipbuilders to emulate Hanwha Ocean, apparently hoping to win subcontracted workers’ votes in the June local elections.

Byun Gwang-yong, a member of the Democratic Party of Korea's (DPK) and mayor of Geoje — home to Hanwha Ocean and Samsung Heavy Industries — called discrimination against subcontracted shipyard workers the most pressing issue to resolve when party leaders visited the island on Jan. 9.

He repeated the sentiment when he joined Rep. Kim Tae-seon of the DPK and Ulsan Dong District Mayor Kim Jong-hoon of the minor opposition Jinbo Party at a Dec. 22, 2025, press conference at the National Assembly.

The Jinbo Party also held a separate press conference Monday, urging HD Hyundai Heavy Industries (HHI) to offer equal performance-based bonuses to subcontracted workers.

“Considering HD HHI’s record operating profit, it should fairly compensate subcontracted workers for their performance,” the party said. “Systematic discrimination against subcontracted workers has led to an outflow of labor and a downturn in regional economies.”

Members of the Ulsan Metropolitan Council from the main opposition People Power Party also broke from their party’s traditional pro-business stance by joining calls for HD HHI to provide equal performance-based bonuses.

“Fair compensation is not a cost but an investment that strengthens long-term industrial competitiveness,” they said at a press conference on Dec. 15 last year.

Buoyed by political support, unions representing subcontracted shipyard workers have strengthened their protests against shipbuilders.

“HD HHI, HD Hyundai Samho and Samsung Heavy Industries are still staying silent,” the unions said in a statement. “The performance of every shipyard worker deserves equal respect.”

The Jinbo Party's Ulsan branch members hold a press conference at the Ulsan Metropolitan Council, Dec. 15, 2025, urging HD Hyundai Heavy Industries and Hyundai Motor to treat their subcontracted workers equally to their direct-hire employees in terms of bonus payments. Courtesy of Ulsan Metropolitan Council

Shipbuilders in dilemma

Industry insiders emphasized that subcontracted workers are employed by subcontractors, which have the right to determine performance-based bonuses.

“Basically, shipbuilders have shared a portion of their profits with subcontractors so they can independently pay bonuses to their employees,” an industry official said on condition of anonymity. “Each subcontractor’s base wage differs, so it is difficult to equalize the ratio of bonuses to base pay.”

Amid the controversy, HD HHI postponed its 2025 performance-based bonus payment to February, deviating from the convention of paying bonuses every December.

Although the company’s union officially requested equal treatment for subcontracted workers, some directly hired employees voiced complaints, worried that their own bonuses might shrink.

“I don’t understand why the company should pay performance bonuses to subcontracted workers," an HD HHI worker wrote on the union’s online forum. "They should ask their own employers.”

Samsung Heavy Industries, meanwhile, decided to freeze its 2025 performance-based bonuses at 50 percent of base monthly salary, the same as in 2024, despite the company reporting its highest earnings in 11 years.

The decision triggered strong backlash from workers, who warned they would put down their tools unless the company reversed its plan.

New labor law’s impact

Industry officials expect the enforcement of the yellow envelope law in March to further burden Korean shipbuilders.

“Once the law takes effect, each company will face growing pressure from unionized subcontracted workers to negotiate directly,” said an executive at a major conglomerate.

According to a recent survey by the Korea Enterprises Federation, 87 out of 100 companies with annual revenue over 500 billion won ($340 million) predicted the law would negatively affect labor-management relations.

In particular, 75 percent expressed concern that unionized subcontracted workers might seek direct bargaining and make excessive demands.