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Sep 14, 2011

Korean Labour Relations by Tom Coyner

Korean democracy is a new and relatively recent development. Many Koreans feel it is natural to protest as part of their newfound freedom. Marches and rallies are part of daily life, albeit less intense than one might think from the news coverage. Only a small percentage of these demonstrations ever get out of hand. The press tends to focus on what makes up perhaps a mere 1% of the story. Only on relatively rare occasions do some Koreans act unruly and out of control. If the reality was as represented in the media, as one resident foreign CEO challenged, why is Korea doing so well compared to many other countries? His answer: the fact is 99% of the real story is about a highly educated, very hard working labor force that is fiercely loyal and committed to company goals
Still, the prudent manager needs to pay close attention to employee sensitivities. This applies especially to foreign businesses that lack deep roots in Korea and, therefore, are more susceptible to labor problems among their potentially skeptical local employees.
To acquire a basis for dealing with some sensitive labor issues, the international executive may benefit from a summary of potential management responses to common situations.

Collective Bargaining Agreement (CBA)
Employers are expected to go beyond the basic monetary compensation by providing various other benefits that also satisfy their employees psychological needs. These provisions can satisfy employee concerns and act as preventive measures against potential labor agitation. At the same time, its important to put a cap on anything that is negotiated -- never leave anything open ended such as an open value of education assistance. This may seem like common sense, but managers have often made this mistake. The real danger comes from the turnover of expatriate managers, some of who may be tempted to negotiate an easy close to a CBA session and let future general managers deal with the fallout years later.
According to the law, each company’s collective bargaining agreement with its union must be re-negotiated every two years. There is no legal requirement on wage negotiations, but by established nationwide practice, they are annual events -- all of which can be very draining on company resources.
Also by law, the union must vote for new leadership every two years. This makes things difficult for everyone since it means starting all over. Management has to build new trust with the union’s new leadership, who often comes in with a mandate to be tougher than the previous team. This forced turnover of leaders often creates factions in a company’s union. At best, union leaders have just two years in office and then they must return to the work floor to wait two more years until the next elections. Though some wage agreements have passed on the first vote last year, one can often expect them to lose in the first vote due to union factionalism rather than the contents of the agreement.

Social Ties
One stabilizing factor in labor relations is the recognition of personal ties among the personnel in a business organization. The strongest of these stem from clan, school, military and regional roots. Informal as they may seem, these links conform to a strict hierarchy based on seniority. They can often serve as a breeding ground for corporate or office politics, but at the same time they can provide efficient, informal communication channels up and down the organizational, hierarchical structure. Employers may often utilize these ties in resolving the conflicts that inevitably arise in human organizations.

However, according to my interviews with expatriate executives, the truly effective manager is the one who personally takes the initiative to learn about his or her employees by walking about and asking questions on both personal and professional levels. Korean employees genuinely appreciate senior managers taking a sincere interest in them as human beings, and they are often proud to demonstrate their expertise in their professional roles. Often the difference between a foreign manager who instills strong employee loyalty and the more remote manager who is often at odds with the Korean staff is that the former executive regularly takes the initiative to spend time really trying to get to know the employees and learning from them how they are each making a contribution to the company.

When labor relations become tense, management is required to develop greater sensitivity and skill in negotiating and in resolving the growing causes behind labor unrest. Since one cannot improve relationships retroactively, the smart executive prepares the communication groundwork from the beginning.

Communication
Maintaining lines of communication with employees is of the utmost importance for a responsible executive. This requires both formal and informal channels of communication. If already established, the Labor-Management Council is an effective, official channel.

But it is also necessary, particularly for an expatriate manager, to open natural, but discreet communication channels with the local staff, preferably at different levels and departments. A deliberate avoidance of bureaucratic protocol will make general management more accessible to the employees, allowing lines of communication to develop. As long as there is a conscious effort to remove all obstacles and restrictions to the free flow of communication between labor and management, disputes can be prevented or defused.

However, in communication with labor, management has to preserve a benevolent but firm and consistent position. Koreans have learned how to respect authority. When privileged information is shared with the union leadership, it is not unreasonable to try to get some kind of quid pro quo agreement from the union leader. The skillful manager maintains with his or her union counterpart a relationship of mutual respect and trust, with a sense of give and take. It is critical that the senior-most executive maintains his or her composure -- no matter how exasperating the situation may be -- by demonstrating maturity and sincerity while being clear in consistently communicating and upholding the company’s principles. This may require the patience of Job at times, but no one said managing at the top is easy.

(Following section ultimately not printed due to newspaper page space limitations)

A Leading Edge
Another way to dilute the possibility of labor conflict is to provide employment benefits that are superior to those of other companies. If an employee is sure he has a better compensation package than is possible elsewhere, he will have no basis for pressing demands for additional compensation. Thus, he will be less inclined to rock the boat where he obviously has a better deal.

For sustained growth and success, it is imperative for a company to have a competitive compensation scheme. For many foreign businesses of relatively small size, it is often difficult to find out what comprises competitive compensation. Therefore, some are below par in compensation, and sometimes they lose key workers to other companies with higher pay systems.

Some foreign managers rely on survey reports published outside the country that may be out-of-touch, providing a warped picture because of distorted samplings. Sometimes these surveys do not take into consideration various informal benefits, which are included in the compensation packages.

However, things have improved in recent years. Some international human resources consulting firms have established Korean offices and can provide assistance, including compensation advice. Also, the larger foreign chambers of commerce have committees focused on personnel issues and these groups can offer invaluable help.

In the case where budgetary restraints do not allow companies to provide a basic pay system on the upper end, unique supplementary benefit schemes can be devised. Such benefits as stock offers can be novel and attractive to most white-collar workers.

By Tom Coyner at Soft Landing Korea www.softlandkorea.com

Tom works with IPG as our senior commercial advisor.  The article appeared in the Korea Times in 2006, but most of the comments hold true today.  Please note that a new irregular worker law was passed that has added a greater degree of labor flexibility in Korea.
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SeanHayes@ipglegal.com
www.ipglegal.com