POSCO draws backlash over plan to directly hire subcontracted workers

Unionized subcontracted workers stage a protest in front of POSCO Center in Seoul, March 10, urging the steelmaker to engage in collective bargaining. Courtesy of Korean Metal Workers' Union

Controversy is growing over POSCO’s plan to directly hire around 7,000 subcontracted workers performing manual labor at its plants in Pohang, North Gyeongsang Province, and Gwangyang, South Jeolla Province.

While existing employees criticized the decision as unfair and voiced concerns that the company would cut welfare benefits to offset higher labor costs, subcontracted workers claimed they would continue to face wage discrimination even after being directly hired.

“Management should not overlook our efforts to join the company or the value of each employee’s work,” the leader of POSCO’s regular workers’ union said after the company announced the plan Wednesday.

“We will not accept any reduction in welfare benefits as the number of employees increases.”

Some employees expressed frustration.

“Hardworking staff have become discouraged and are considering leaving the company,” one employee wrote on Blind, an anonymous social media platform for verified workers.

POSCO said the move is intended to halt the long-standing practice of outsourcing dangerous work and to conclude 15 years of legal disputes with subcontracted workers. The Supreme Court has repeatedly ruled that POSCO must directly hire subcontracted workers who are under its supervision and perform similar duties to regular employees.

“We aim to improve workplace safety and strengthen our steelmaking competitiveness by directly employing workers from our partner firms,” a POSCO official said.

The company also stressed that subcontracted workers have welcomed the decision.

However, unions representing subcontracted workers denounced the plan as a way to sidestep the court’s order to ensure equal treatment.

“After POSCO accepted the Supreme Court’s 2022 ruling and directly hired some of its 50 subcontracted workers, the company classified them separately and paid them lower salaries,” the subcontracted workers’ unions said.

“Its latest decision to hire 7,000 workers appears no different.”

As POSCO remains vague about details of the plan, concerns are mounting over whether the company can handle the rising costs.

Based on average wages, POSCO is expected to spend an additional 700 billion won ($473 million) in annual labor costs, adding to its financial burdens amid the steel industry’s declining profitability. Last month, S&P Global downgraded POSCO’s credit rating, citing rising expenditures and the market slump.

However, POSCO will no longer have to pay subcontractors after direct employment takes effect. The company’s filings showed it paid a total of 2.9 trillion won last year to subcontractors for dispatching workers.

The steelmaker said it is too early to estimate any increase in overall costs.

It expects a limited impact on welfare-related expenses, due to the creation of a joint fund with subcontractors in 2021 to finance welfare programs for subcontracted workers, including tuition support for their children.

Still, the business community is concerned that POSCO’s case could pressure other companies to hire subcontracted workers directly under the revised Trade Union and Labor Relations Adjustment Act, which allows subcontracted workers to negotiate directly with the clients of their employers.