Allegations: The complainants allege that the Government employs Budget,
Management and Innovation Guidelines, as well as management performance evaluations, to
pressure public institutions and their unions to agree to changes in working conditions
disadvantageous to workers, in particular in relation to wages in violation of the principle
of free collective bargaining
- 438. The Complaint is contained in a communication dated 15 June 2022
from the Korean Public Service and Transport Workers’ Union (KPTU), the Korean
Confederation of Trade Unions (KCTU), and Public Services International (PSI).
- 439. The Government provided its observations in a communication dated 3
February 2023.
- 440. The Republic of Korea has ratified the Freedom of Association and
Protection of the Right to Organise Convention, 1948 (No. 87), and the Right to Organise
and Collective Bargaining Convention, 1949 (No. 98).
A. The complainants’ allegations
A. The complainants’ allegations- 441. In their communication dated 15 June 2022, the complainants allege
that through the unilateral issuance of “guidelines” concerning matters covered by
collective bargaining between public employers and unions, and by penalizing public
employers that fail to comply with those guidelines through reducing their points in
management performance evaluations, the Government of Korea has been compelling public
sector employers and workers to enter and enforce only collective agreements that meet
the standards set in the guidelines.
- 442. The complainants recall that similar allegations were raised in Case
No. 2829 concerning the Republic of Korea [see 365th Report, paras 430–582] and that on
that occasion, the Committee had requested the Government to ensure that trade unions
were consulted prior to adopting measures such as the issuance of budgetary guidelines
regarding public institutions and the assessment of the soundness of their financial
situation through performance management evaluation reports, audits or inspections. The
complainants allege that despite this recommendation, the Government has steadfastly
precluded unions from decision-making on various governmental directives and management
performance evaluations. According to the complainants, the Government has used these
unilateral measures to forbid collective agreements on wage increases beyond the
ceilings set, to introduce job-based pay and wage peaks, to reduce in-company loans for
employees and to alter eligibility criteria for certain types of wages. The Government
has also used these measures to prevent the implementation of signed collective
agreements.
- 443. Regarding the structure of governance over public institutions in
the Republic of Korea, the complainants indicate that pursuant to the Act on the
Management of Public Institutions (AMPI), the Ministry of Economy and Finance (MOEF)
designates the public institutions subject to its management oversight within one month
following the commencement of each fiscal year and that in 2022, the number of such
institutions amounted to 350, including 36 public corporations, 94 quasi-governmental
institutions, and 220 “other” institutions.
- 444. These institutions are subject to regulation and control by the MOEF
and the Committee on the Management of Public Institutions (CMPI). The CMPI is the apex
of the hierarchy of governance over public institutions in Korea. It is chaired by the
Minister of Economy and Finance and has about 20 members, including officials from the
Prime Minister’s Office and deputy-ministers or similarly ranked civil servants from
various ministries and administrative and other major governmental agencies. The CMPI
deliberates over matters such as the designation and un-designation of public
institutions, review of proposed creation of new public institutions, appointment and
dismissal of directors to boards of public institutions, management performance
evaluations and management guidelines.
- 445. The complainants state that together, the MOEF and the CMPI
establish three sets of guidelines:
- 446. The complainants allege that the 2022 Budget Guidelines limit the
increase in each public institution’s total labour cost to 1.4 per cent of the
corresponding figure in 2021. Also, article 10 of the latest Management Guidelines
(revised on 9 April 2021) require all public institutions to adopt wage peaks, while the
latest Innovation Guidelines (revised on 29 July 2021) require public institutions to
exert tighter control over in-company loans for employees by providing for stricter
eligibility criteria, reduce the amount of money available for loans and raise
interest rates.
- 447. Concerning management performance evaluations, the complainants
indicate that every year, the MOEF evaluates the management performance of public
institutions for a total score of 100 points, and that institutions are divided into six
classes or grades depending on how they fare on evaluation, including superior (S),
excellent (A), good (B), average (C), poor (D) and very poor (E). According to the
complainants it is not uncommon for as little as a half point to determine the grade an
institution obtains. This grade has an impact on the amount of bonus to which the
workers are entitled, namely, workers of the institutions scoring a D or an E would not
receive any bonus. Furthermore, the MOEF has the authority to dismiss or propose the
dismissal of the directors of poorly performing institutions. The enforcement decree of
the AMPI requires the MOEF to prepare a manual for the management performance evaluation
before the beginning of every fiscal year. According to the 2022 manual, the six
evaluation indicators are: (1) management strategy and leadership; (2) social values;
(3) efficiency; (4) organizational, human resource, and financial management; (5)
remuneration and benefits management; and (6) major projects, activities and
achievements. Under the fifth indicator, there are “control of total labour costs” with
3 points, and “labour relations” with 2 points.
- 448. The complainants further denounce the absence of channels of direct
negotiation and communication between the unions and the Government. They allege that
although the Korean Government is the de facto employer of public sector workers, it
neglects its duty to engage in collective bargaining by hiding behind the nominal heads
and boards of public institutions. According to the complainants, while the governmental
guidelines and management performance evaluations largely determine the working
conditions of public sector workers, the Government claims that the guidelines are
simply recommendations and that it leaves individual public institutions free to
negotiate and bargain with their respective unions on matters of wages and working
conditions.
- 449. To illustrate their allegations, the complainants provide further
details with regard to the impact of government guidelines and management performance
evaluation on free and voluntary collective bargaining between individual public
institutions and their unions concerning the following subjects: (1) total labour costs
and rates of wage increases; (2) payment of performance incentives (bonuses); (3)
replacement of seniority-based pay system by a skill-based wage system; (4) introduction
of wage peaks and; (5) allocation of in company loans to employees.
- 450. The complainants state that the annual Budget Guidelines indicate
the percentage by which the total labour costs of all public institutions may be
increased. This percentage has been fixed at 0.9 for 2021 and 1.4 for 2022. The
Guidelines also indicate that an institution that is found to have exceeded the maximum
rate of increase in the total labour cost in management performance evaluation, is to
limit their budget for the total labour cost of the current year by the same amount by
which they had exceeded it the previous year. The complainants indicate that individual
public institutions organize collective bargaining annually after the release of the
year’s Budget Guidelines. These negotiations only cover the allocation of the total
labour cost budget that is given in the Guidelines, which are established without any
consultation with unions. The complainants allege that unions of public institutions
cannot bargain wage agreements that don’t comply with the government Guidelines, because
if an institution and their union agree on a wage increase beyond the maximum increase
in total labour costs indicated in the annual Budget Guideline, the institution will
have to reduce its total labour cost by as much the following year, which will cancel
the effect of the agreed increase. Furthermore, going beyond the maximum increase rate
permitted in the Budget Guidelines will result in the loss of the three points given for
“total labour cost control” in management performance evaluation. This might entail the
reduction or even suppression of the workers’ bonuses as well as the dismissal of the
executives of the institution.
- 451. The complainants further refer to the case of the unimplemented
agreement concerning wage increase in KORAIL Networks, a subsidiary of Korea Railroad
Corporation (KORAIL), whose activities range from handling of station tasks, ticketing,
phone customer services, parking, and special cargo freight by KTX trains on behalf of
KORAIL. According to the complainants, KORAIL holds 98.98 per cent of the equity at
KORAIL Networks and effectively determines the wages and working conditions of the
latter’s employees by assigning and providing consignments for those workers’ wages.
Therefore, the complainants hold that KORAIL is the real employer of KORAIL Network’s
workers.
- 452. The complainants indicate that nearly 1,600 out of 1,800 workers at
the company are temporary and contract-based workers who receive minimum and
near-minimum wage and on average earn only 44.8 per cent of regular KORAIL workers’
earnings. In 2019, the parent company convened a council composed of labour and employer
representatives and external experts with a view to discussing ways of improving wages
and working conditions for workers affiliated with its subsidiaries. The council
mediated an agreement dated 25 November 2019 between KORAIL and the Korean Railway
Workers’ Union (KRWU) which represents workers of both KORAIL and KORAIL Networks,
according to which KORAIL raised its consignment for wages of KORAIL Networks to reflect
100 per cent of the market rate for comparable jobs. Pursuant to the agreement, the 2020
basic wages of KORAIL Network employees were to be determined by multiplying the market
rate for comparable jobs at the time of the signature of the agreement by the rate of
increase set out in the annual governmental Guidelines. This entailed a 13.2 per cent
increase in KORAIL Network’s total labour cost as compared to 2019, while the 2020
Budget Guidelines only allowed for raises of up to 4.3 per cent only for workers whose
average wage in 2018 was 90 per cent or less of the industrywide average or 60 per cent
or less of the average wage at all public institutions. Therefore, despite having
obtained a significantly greater budget for wages from the parent company, KORAIL
Networks ended up raising its workers’ wages by 4.3 per cent only, citing the 2020
Budget Guidelines as the ground for this decision. The complainant alleges that in this
instance, governmental Guidelines and management performance evaluations effectively
neutralized an agreement freely reached between the parties, obstructing the wage
increase needed for chronically underpaid workers.
- 453. Further, on the control of “total labour costs” and its impact on
the right to free collective bargaining on various wage components, the complainants
allege that most employers in Korea, in both private and public sectors, have been
paying their workers less than required by the law for overtime, night-time and holiday
work, as well as for other statutory and holiday allowances. A watershed Supreme Court
decision dated 18 December 2013 changed the situation by providing that any agreement
reached between a particular employer and its workers about paying less than what the
law requires for extended, night-time or holiday work is null and void, and workers must
be paid the proper amounts of overtime pay they are owed according to the law. The
complainants allege that the majority of private sector employers have paid the amounts
of statutory and other allowances as required by the Supreme Court decision, whereas the
majority of public sector employers have not done so. According to the complainants,
since 2013, public sector workers have repeated similar lawsuits to force their
employers to pay past withheld wages, benefits and allowances. Until 2021, Public
employers who lost these lawsuits, were paying the court-ordered damages from their
reserve funds rather than their labour cost budgets, over which the MOEF exerts tight
control, and this was in accordance with the Budget Guidelines which provided that
public institutions could pay the actual increases in the cost of wages as a result of
payment of court-ordered damages out of their reserve funds, regardless of the limit on
the annual increase in the total labour cost. However, the MOEF subsequently changed the
Budget Guidelines in this regard and announced that it intends to induce public
employers to reform their remuneration systems by revising the list of labour-related
costs and expenses payable from accounts other than the total labour cost account, and
that as of 2022, public employers were to include the additional wages they pay
following court decisions over ordinary wage lawsuits in their total labour cost
account. The institutions whose total labour costs would exceed the limit set out in the
Guidelines will lose points on management performance evaluation, regardless of their
paying or not court-ordered damages.
- 454. The complainants allege that the new policy weakens the bargaining
power of unions by pitting the workers who work overtime and those who don’t against
each other. Meanwhile, the pressure that this new policy exerts on the total labour cost
budget, induces public institutions to reduce the amount of ordinary wages at stake, and
to do this they have to enter new collective agreements that are more disadvantageous to
workers, and/or obtain the consent of unions representing the majority of their workers,
or the consent of the majority of workers directly if there is no such union at the
workplace, to alter the rules of employment. In other words, through the new Guidelines,
in the making of which unions did not participate in any way, the Government is
pressuring both public employers and unions to change their wage policies in ways more
detrimental to workers.
- 455. The complainants indicate that performance incentives or bonuses may
represent up to 250 per cent and 100 per cent of the monthly wages of workers in public
corporations and quasi-governmental institutions respectively. The Budget Guidelines
recommend that institutions pay performance incentives out of their reserve funds.
Pursuant to the Guidelines, the amount of the performance incentives paid depends both
on the result of the management performance evaluation of the institution concerned, and
the performance of the individual workers or their department. The complainants add that
in its decision dated 13 December 2018, the Supreme Court of Korea ruled that
performance incentives dependent on the results of management performance constitute
part of the workers’ ordinary wages.
- 456. The complainants indicate that the Budget Guidelines require the
public corporations and quasi-governmental institutions to establish criteria for the
differentiation of performance incentives to be paid to individual workers or their
departments, dividing workers and departments into at least six grades according to
their performance records. The highest grade should cover at least 10 per cent of the
employees; and the two lowest grades together should also include at least 10 per cent
of all employees. No single grade may contain more than 50 per cent of all employees.
The Guidelines further provide that the workers obtaining the lowest grade should not be
paid performance incentives, while the workers and departments garnering the highest
grade should receive at least double the amount of performance incentives of those in
the second-lowest grade.
- 457. Concerning the impact of management performance evaluations on the
performance incentives allocated to each institution’s workers, the complainants
indicate that the 2022 Management Performance Evaluation Manual, performance incentives
are to be allocated to each institution’s workers according to the final grade that the
institution garners, within the amount of the budget set in the Budget Guidelines.
According to the MOEF recommendation in the Reform Measures for Management Performance
Evaluations of Public Institutions dated 31 August 2021, the workers of public
corporations scoring S should receive up to 250 per cent of their basic monthly wages;
those scoring A up to 200; B up to 150 and C up to 100 per cent, while the workers of
corporations scoring D or E will not be paid any performance incentives. For workers of
quasi-governmental institutions these percentages range between 100 and 40 for
institutions scoring S to C respectively.
- 458. The complainants state that public institutions in Korea indeed
decide how to calculate the amounts of performance incentives as well as when and to
whom they are to be paid in accordance with collective agreements with unions, or rules
of employment established in consultation with the unions. Nevertheless, governmental
guidelines determine much of the rules and the amounts of performance incentives to be
paid to public sector workers in Korea. As an example of public sector workers having
expressed their opposition to the rule of differentiation of performance incentives
dictated by the Budget Guidelines, the complainants refer to the case of the Land and
Geospatial Informatrix Corporation (LX), which paid significantly different amounts of
performance incentives to its individual employees in 2016 as had been recommended by
the Guidelines. The union in the company re-collected and re-distributed the performance
incentives with some of the better paid workers’ voluntary contribution. The company
reacted by forcing the president of the union to step down, however, the Supreme Court
found this decision unlawful and ordered his reinstatement, arguing that the fact that
he had led the redistribution of the 2015 performance incentives can be construed as his
fulfilling the role he had as the head of the union and as an action to raise an issue
with the company’s decision and there are no grounds to conclude that it was unlawful or
unfair to raise and register his complaint about the company decision is such a
way.
- 459. The complainants state that in the past, seniority-based pay was the
norm in the vast majority of public institutions in Korea. However, the Government
decided to transform the remuneration system in the public sector to prioritize
performance and skills. In this framework, the Government’s 2020 Economic Policy
Direction which was published on 19 December 2019 provided for reviewing incremental
measures to support transition from seniority-based pay to job and competence-based pay,
for example through mitigating the impact of seniority by introducing performance review
and strengthening the connection between productivity and wages, and building public
support through social dialogue, for instance by assembling labour relations committees.
In May 2020, the Government convened a meeting for remuneration reforms in public
institutions, officially encouraging the heads of those institutions to adopt a
performance-based and job-centred wage system.
- 460. The complainants further indicate that on 19 May 2020, the Joint
Action Committee for Public Sector Unions, a joint initiative of the KCTU and the
Federation of Korean Trade Unions (FKTU) released a joint statement, demanding, among
other things, that the MOEF refrain from pushing for the revision of management
performance evaluation indicators with a view to promoting wage reforms that were
included without consulting labour. The statement also emphasized that discussions on
wage reforms ought to proceed through dialogue between the representatives of workers,
including those representing the five industry level trade unions and federations from
the KCTU and the FKTU and the Government and that the Government/MOEF, as the de facto
employer of public sector workers, should not introduce a new wage system that utterly
disrespects the concerns and wishes of workers. The complainants add that despite the
foregoing statement, on 24 September 2020 the MOEF released the Revised Manual of
Management Performance Evaluations for Public Institutions without ever having consulted
labour representatives and in this revised version, it had included a new criterion
within the “Remuneration and Benefits” indicator, namely “efforts and outcomes for
transitioning into a more rational, job-based remuneration system”, which was assigned
two points. Points were also assigned for “revising the remuneration policy on the basis
of consent from labour”, which, according to the complainants, effectively meant
disadvantaging public institutions that failed to garner the workers’ consent and
therefore ultimately prevented unions form registering their complaints in any way. The
complainants stress that it is essential for the Government to have sufficient dialogue
with public employers and workers before introducing such a paradigm shift, because even
if all the parties agreed to its introduction, it would be necessary to invest some time
in reviewing and preparing for potential issues.
- 461. The complainants state that wage peaks allow the employer to keep
reducing the employee’s wage at a predefined rate year to year, once it has reached the
peak, so that the employee can keep working in the same workplace for a longer time. The
Government based wage peaks on section 19(2) of the Act on Prohibition of Age
Discrimination in Employment and Elderly Employment Promotion (EEPA), which provided
that the employer and the union in a workplace extending its retirement age to 60 years
shall take the necessary measures, including the restructuring of its wage system. The
complainants affirm however that the statute does not mention wage peaks. On 7 May 2015,
the MOEF distributed the Recommendations Concerning Wage Peaks in Public Institutions,
which were finalized after deliberation in the CMPI and the adoption of a resolution by
this body. The Recommendations required all public institutions in Korea to adopt wage
peaks. Wage peaks were also included as an indicator of management performance
evaluation in the Manual released by the CMPI in September 2015. The complainants allege
that by the end of 2015 all 313 subject institutions had adopted the policy. They
indicate that in March 2018, the Government revoked the 2015 Recommendation,
nevertheless, wage peaks remained part of the Management Guidelines, which in their
revised 2021 edition provide that public corporations and quasi-governmental
institutions are to adopt wage peaks in relation to every employee but may decide not to
apply them to very low wage earners, such as those earning 150 per cent or less of the
minimum wage. The 2021 Manual on Management Performance Evaluation also retained the
application of wage peaks as an indicator of public corporations’ performance.
- 462. The complainants cite the Financial Analysis of Public Institutions
for the financial year 2018 according to which between mid-2015 when wage peaks were
introduced and 2018, the wages of workers to whom the wage peaks applied were cut by 23
per cent a year on average, with the cumulative rate of wage loss amounting to 56.7 per
cent during the 2.5 years wage adjustment period, while wage peaks served to extend the
average retirement age only marginally, from 59.4 years to 60.2. They conclude that as
the wage peaks clearly disadvantage workers, pursuant to section 94 of the Korean Labour
Standards Act (LSA), before introducing them the employer must gain consent from the
unions representing the majority of workers or the majority of workers themselves in the
absence of such unions. However, unions at most public institutions in Korea feel
pressured to accept wage peaks so that their respective employers can fare well on
management performance evaluations to avoid other unwanted consequences. According to
the complainants this amounts to interference by the Government in the free negotiation
between unions and employers in public institutions, where both parties are compelled to
consent because of the pressure to conform with Guidelines and management performance
evaluation indicators.
- 463. The complainants state that the Employee Welfare Fund Act allows the
public sector employer to use the Employee Welfare Fund, to which both the employer and
the employees contribute, to provide loans and financial aid for employees at low
interest rates. According to the complainants, as of 2021, in-company loan programmes
were in place in 66 Korean public institutions. On 29 July 2021 after deliberation and
resolution of the CMPI, the MOEF released an amended edition of the Innovation
Guidelines which instructed all public institutions to tighten their in-company loan
programmes by imposing stricter eligibility conditions, reducing the amount of money
available for loans and raising interest rates. The MOEF also reflected this change in
the revised edition of the Management Performance Evaluation Manual released 1 October
2021, by including two new qualitative criteria, which were worth 1.5 points together,
reflecting the new restriction on in-company loans. The complainants allege that these
changes were introduced into performance management evaluation criteria despite strong
criticism on the part of the Korean labour community, condemning this as an intervention
in free negotiation between employers and unions, to which the MOEF responded by
claiming that this is merely a non-binding guideline. However, according to the
complainants, because of the risk of losing points on management performance
evaluations, public institutions and their unions entered collective agreements
downsizing the availability of in-company loans, while throughout this process, the
Government refused to consult or engage with the labour community as a whole or with the
unions of individual public institutions.
- 464. In conclusion, the complainants state that the Korean Government
unilaterally determines the wages and working conditions of public sector workers by
employing the Budget, Management and Innovation Guidelines as well as management
performance evaluations to pressure public institutions and their unions to agree to
conditions disadvantageous to workers, such as the limit by which total labour costs may
be increased, the amounts of performance incentives that may be paid and the rules
governing their distribution, job-based pay and wage peaks and reduction of in-company
loans for employees. More importantly, workers in Korea have no opportunity or channel
through which to participate in decision making on these subjects. The complainants
conclude that the Government’s practice violates the principle of free negotiation set
out in Article 4 of Convention No. 98 and also goes against the principle of worker’s
participation in decision-making on their working conditions.
B. The Government’s reply
B. The Government’s reply- 465. In its communication of 3 February 2023, the Government indicates
that when establishing the Budget Guidelines, it had resorted to tripartite
consultations through the Economic, Social and Labour Council (ESLC), which was
previously called the Economic and Social Development Tripartite Council. The Government
indicates that a body called “Public Sector Development Committee” (PSDC), which was
intended to come up with future-oriented reform measures for the public sector was
created under the ESLC. This body was composed of 15 members including a chairperson and
five public interest commissioners and labour, employers and government were each
represented by three commissioners. The PSDC held several meetings between September
2014 and April 2015. According to the Government, issues related to the 2015 Budget
Guidelines were on the agenda of the ESLC meetings and two working-level meetings
between the MOEF and worker representatives concerning labour proposals on the Budget
Guidelines were held in November 2014. The outcome of these meetings was some progress
on the issue of rate of contribution to Employee Welfare Funds, which although did not
lead to an agreement, was finally considered by the Government in the partial revision
of the 2015 Budget Guidelines.
- 466. The Government further indicates that in November 2020 the ESLC,
created the Public Institution Council, consisting of ten members from labour,
Government and public interest groups with a view to revamping the wage system of public
institutions, to reflect the objective value of the job in the wage system. An agreement
was reached on the principle that the restructuring of the wage system will be
implemented autonomously and gradually, through the agreement of labour and management
in each public institution, rather than in a unilateral and standardized way. The
Government adds that the ESLC decided to continue the labour-government dialogue for the
follow-up concerning sustainable wage system in public institutions and finalized a
detailed agenda on those matters. This decision entailed the holding of the second
Public Institution Council on 25 June 2021, which facilitated a survey on public
institutions’ wage system and wage peak. The Report on the Outcome of the Survey Onsite
Public Institutions was issued by the public interest commissioners and the mission was
completed on 24 March 2022.
- 467. Regarding the applicable domestic law, the Government refers to the
constitutional and legislative provisions guaranteeing the right to collective
bargaining and indicates that even though Budget and Innovation Guidelines are informed,
public institutions should first engage in their own decision-making process – by
resolution of the executive board or otherwise – and propose revision frameworks, such
as employment rules or collective agreements related to wages, welfare, contribution to
employee welfare fund and in-company loans programmes. The Government concludes that
therefore the Guidelines do not violate the right to collective bargaining under the
Korean law. Public institutions may decide not to amend their employment rules or
collective agreements in line with the Guidelines due to opposition from workers or
labour unions. Even in such cases, the institutions are merely evaluated as insufficient
in management performance evaluation regarding matters such as wages and welfare
expenses.
- 468. Regarding the alleged violation of the right of public sector
workers to collective bargaining through the Budget Guidelines, the Government indicates
that these are a type of management guideline under section 50 of the AMPI and their
enactment and notification is a matter of internal supervision between the Government
and public institutions. The MOEF finalizes the Budget Guidelines after deliberation and
resolution made by the Public Institution Steering Committee, which also examines and
evaluates whether they have been followed, including regarding the increased rate of the
total labour cost, by assessing management performance. According to the Government, as
the Supreme Court has ruled in a decision concerning the 2001 Budget Guidelines, the
Guidelines do not have the force of legal regulations mandating specific rights or
obligations. Their content concerning wages, welfare benefits and Employee Welfare Fund
are merely internal recommendations to the investee (the institution concerned), and do
not force or intervene in collective bargaining. The Government concludes that therefore
the Budget Guidelines do not affect the public institution workers’ right to collective
bargaining.
- 469. Concerning the alleged violation of public sector workers’ right to
collective bargaining through management performance evaluations, the Government
indicates that while it ensures that the management of public institutions is autonomous
and responsible, it also conducts management performance evaluations to enhance
publicity and management efficiency and to induce improvement of public services.
Evaluation standards and methods are presented in advance in the “Management Evaluation
Manual of Public Institutions” which does not have binding force and if public
institutions do not comply, they will only be evaluated as insufficient in the
management improvement concerning the relevant indicators. For example, three
institutions had total labour costs greater than the ceiling indicated in the
2021 Budget Guidelines and reflected as an indicator in the Management Evaluation
Manual, and many applied criteria different from those set forth in the Innovation
Guidelines and the Manual concerning in-company loans. Therefore, the Government
concludes that management performance evaluation or the Manual related to it do not
violate the right of public institutions’ unions to engage in collective bargaining and
to conclude collective agreements. It affirms that as management performance evaluation
only concerns internal supervision by the Government, they do not need to be the object
of prior consultation with the union.
- 470. Concerning the alleged absence of channels of communication and
participation for public sector unions, the Government reiterates its indications
concerning the consultations in the PSDC in 2014 and the activities of the Public
Institution Council in 2020 and 2021–2. It further adds that the parties to collective
bargaining are employers’ and workers’ organizations, not the Government.
- 471. More particularly, concerning the alleged unilateral decision of the
Government on total labour costs, rates of increase and performance incentives, the
Government indicates that the system of regulation of total labour cost aims at
preventing excessive expansion and lax management of the public sector. Most public
institutions receive government budget support and are legally granted exclusive
business rights, and therefore strict management of their labour cost is essential. The
Government operates the system in a flexible manner, for example by managing the rate of
increase in labour cost according to the level of remuneration of institutions, with a
view to reducing the wage gap between institutions. The Government adds that the Budget
Guidelines only set the rate of increase in total labour cost commonly applied to all
public institutions, while each institution can freely and autonomously decide on
specific payment methods and amounts within the ceiling of the total labour cost based
on labour-management agreements. The Guidelines do not invalidate collective agreements
that have already taken effect, and Government agencies do not block or restrict the
effectiveness of the concluded collective agreements. The Budget Guidelines are not
binding standards for collective agreements and do not require Government approval for
collective agreements.
- 472. Concerning the allegations relating to the neutralization of the
collective agreement on wage increase in KORAIL Network, the Government reiterates that
the operation of the total labour cost system is flexible and takes into consideration
the level of remuneration and the wage gap between institutions. It further indicates
that the company has been gradually raising the increase rate (+1.0%–1.5%) of its total
labour cost over eight years since 2015, in accordance with the Government’s
differential management of public institutions’ total labour cost. It concludes that the
complainants’ allegation that it has neutralized the collective agreement on wage
increase at KORAIL Networks is unfounded.
- 473. Concerning the new policy requiring inclusion of the amounts paid in
implementation of court decisions concerning ordinary wage lawsuits in the total labour
cost account, the Government indicates that most public institutions have not
experienced such lawsuits or prevented them by reforming their wage system, encouraging
the use of annual leave and reducing overtime work immediately after the lawsuit.
However, several public institutions continued to be targeted by lawsuits because they
had not amended their remuneration regulations. Therefore, in 2022, the exception to the
total labour cost limit was abolished after eight years with a view to restore equity
and fairness between institutions and after collecting opinions from related agencies.
The exception was allowed because the payment of these amounts required preparation
processes, such as amendment of regulations of each institution, but considering that it
had been in place for quite a long time, as of 2022 additional wages paid according to
the results of ordinary wage lawsuits were included in the total labour cost limit as
well. The Government further reiterates that the Budget Guidelines are not binding and
do not invalidate collective agreements that have already taken effect and that
therefore the complainants’ allegation concerning the forced payment of additional wages
following ordinary wage lawsuits from the total labour cost budget is invalid.
- 474. Concerning performance-based pay, the Government indicates that it
is proposed in the Budget Guidelines as an ideal model, as an action of management and
supervision of the Government over public institutions, but as such does not infringe or
have a direct impact on the right to collective bargaining.
- 475. Concerning the wage peak system, the Government indicates that it
was first introduced in 2016 with the agreement of tripartite groups and with the aim of
reconciling the extension of the retirement age with robust youth employment. The
Government emphasizes that wage peaks should be maintained for restructuring the
retirement system in an employment-friendly manner. Therefore, the Government provides
guidelines to public institutions stating that the labour cost of the newly employed is
to be compensated by the reduction of costs resulting from the wage peak system.
Nevertheless, the details of the wage peak system, such as the payment rate and the
adjustment period can be designed reasonably considering the age distribution and wage
system of each institution and decided by agreement between their workers and employers.
The Government thereby rejects the allegation that it has forced labour and management
consent in this regard.
- 476. Regarding the tightening of requirements for obtention of in-company
loans through the revision of the 2021 Innovation Guidelines and the alleged forcing of
public institutions to accept collective agreements along these lines, the Government
indicates that like the Budget Guidelines, Innovation Guidelines don’t bind public
institutions but are proposed by the MOEF for innovation in their management. Their
enactment and notification are part of the internal supervisory operations between the
Government and public institutions. The Government affirms that pursuant to sections 4
and 94 of the LSA, public institutions that amend their internal regulations concerning
in-company loans to bring them into conformity with Innovation Guidelines must obtain
the agreement of their trade unions, and they may decide not to follow the Guidelines in
their regulation of limits and interest rates of in-company loans. Unions can freely
practice their right to collective bargaining guaranteed by the LSA or the Trade Union
and Labour Relations Adjustment Act (TULRAA) despite the provisions of the Guidelines.
The Government indicates that public institutions benefit from a series of business and
financial advantages compared to similar private entities and as an investor, the
Government makes recommendations regarding welfare benefits and in-company loans to
their employers considering these special characteristics of public service, which do
not interfere with collective agreements in public institutions.
- 477. In conclusion, the Government rejects the complainants’ allegation
that it sets the wages and working conditions of public institution workers unilaterally
through Guidelines, indicating that it has enforced social dialogue on relevant
Guidelines through the PSDC and other committees under the ESLC. The Government
emphasizes that because most public institutions operate with its budget support and
enjoy exclusive business rights, it is essential for the Government/investor to
establish and publish Guidelines concerning their operation and this is in conformity
with ILO standards. It further reiterates that the Guidelines only concern internal
supervisory operations between the Government and public institutions and do not have a
binding legal character. Public institution workers can freely exercise their right to
collective bargaining through unions in accordance with domestic law and constitution.
Therefore, Guidelines do not infringe the right to collective bargaining, nor do they
have a direct impact on it.
C. The Committee’s conclusions
C. The Committee’s conclusions- 478. The Committee notes that this case concerns the part of social
dialogue in the elaboration of Budget, Management and Innovation Guidelines concerning
public institutions established by the Government of the Republic of Korea, as well as
the impact of those Guidelines, as enforced through the management performance
evaluation, on the exercise of the right to free and voluntary collective bargaining by
workers and employers of Korean public institutions, in particular with regard to wage
and benefit related issues.
- 479. The Committee notes that the complainants allege that by setting the
Guidelines without consulting workers’ organizations, the Government unilaterally
defines the ceiling of total labour costs and wage increases in public institutions;
determines how performance incentives should be distributed; changes the structure and
principles governing the wage system through the introduction of wage peaks and
replacement of seniority-based wage system by a skill and performance-based one;
requires changes to the wage system with regard to overtime and holiday work and,
tightens the conditions of allocation of in-company loans to employees. The complainants
allege that the Guideline recommendations regarding these matters have a great force in
practice, as they are reflected in management performance evaluation indicators and
scoring poorly in those evaluations can entail concrete consequences for workers and
employers of public institutions concerned, in terms of budget allocation and possible
dismissal of executives. The Committee notes that according to the complainants, this
system puts a great deal of pressure on collective bargaining which takes place at each
public institution, whereby employers and workers/unions feel compelled to validate in
their agreements the measures recommended in the Guidelines, so as to avoid the unwanted
consequences of a poor score at management performance evaluation. Therefore, the
complainants allege that the Government practice violates the principle of free
collective bargaining set out in Article 4 of Convention No. 98 as well as the principle
of participation of workers in the determination of terms and conditions of
employment.
- 480. The Committee notes that the Government rejects these allegations by
indicating that: (i) social dialogue has taken place under the ESLC, in 2014 concerning
the 2015 Budget Guidelines through the Public Service Development Committee and, since
November 2020 through the Public Institution Council concerning wage system
restructuring with a view to reflecting the objective value of the job to the wage
system; (ii) management performance evaluation and the related manuals concern only
internal supervision by the Government and do not violate the right to collective
bargaining, therefore they do not require prior consultation with unions; (iii) the
enactment and notification of Guidelines is only a matter of internal supervision
between the Government and public institutions. Guidelines have no legal force, do not
invalidate effective collective agreements, and do not require Government approval of
concluded collective agreements; and (iv) the right to collective bargaining is
guaranteed under the Korean law and public institutions should obtain consent from
unions, or in their absence, from the majority of workers, regarding matters related to
wages and welfare. Public institutions may refrain from following the Guidelines’
recommendations due to opposition from workers, and in this case their decisions will be
valid, and they would only be evaluated as insufficient in the management performance
evaluation in relevant matters.
- 481. The Committee notes that the Government agrees that the issues
raised in the complaint are within the scope of collective bargaining in the public
sector and affirms that the right to collective bargaining can be, and is, freely
exercised in Korean public institutions. The Committee also notes that collective
bargaining on terms and conditions of employment in the public institutions of the
Republic of Korea is completely decentralized and takes place at the individual public
institution level. Nevertheless, it notes that regarding certain terms and conditions of
employment referred to in the complaint, the Government has formulated general standards
and policies in form of Guideline “recommendations” that are applicable to all public
institutions under MOEF monitoring. These recommendations are not legally binding but
are integrated into the indicators used to evaluate the management performance of public
institutions, which in turn determines budget availability in future exercises. As such,
they operate as a legally soft, but practically effective framework for collective
bargaining at the individual institution level.
- 482. Observing that workers and employers of Korean public institutions
should have the right to determine terms and conditions of employment, including wage
and welfare-related issues, by means of collective bargaining, the Committee recalls
that, in its examination of a previous case concerning Korea, it has acknowledged that
collective bargaining in the public sector called for verification of the available
resources in the various public bodies or undertakings, that such resources were
dependent on state budgets and that the period of duration of collective agreements in
the public sector did not always coincide with the duration of the budgetary laws – a
situation which could give rise to difficulties. The Committee considered at the time
that the financial authorities could formulate in this regard recommendations in line
with government economic policy [see Case No. 2829, 365th Report, para. 572]. As regards
the matters in the case at hand, the Committee considers that in view of the special
characteristics of most public institutions which the Government has underlined, such as
their receiving Government budget support and their enjoyment of exclusive business
rights, a framework may be defined for the exercise of the right to collective
bargaining in those institutions with a view to ensuring the preservation of public
interest. Nevertheless, the Committee also considers that, as in previous cases, to be
compatible with the right to free and voluntary collective bargaining, this framework
should “leave a significant role to collective bargaining” and that “it is essential
that workers and their organizations be able to participate fully and meaningfully in
designing this overall bargaining framework, which implies in particular that they must
have access to all financial, budgetary and other data enabling them to assess the
situation on the basis of the facts” [see Cases Nos 3026 and 2941, 374th Report,
para. 666].
- 483. In view of the above considerations, the Committee notes that the
present case raises two main questions: (i) whether the Government Guidelines, as upheld
through management performance evaluations, still leave a significant role to collective
bargaining in public institutions with regard to the issues raised in the complaint, and
(ii) whether the workers and their organizations have been able to participate fully and
meaningfully in designing the framework put in place through the Guidelines’
recommendations.
- 484. Regarding total labour cost control and the ceiling on wage
increases provided in the Budget Guidelines, the Committee notes that according to the
complainants’ indication, which the Government does not challenge, the Budget Guidelines
are established and notified annually. The Committee notes however that the Government
refers to social dialogue in a tripartite body concerning them only on one occasion, in
2014, at which occasion, according to the Government no agreement was reached. The
Committee notes therefore, that every year the workers in public institutions subject to
the Guidelines and their organizations have been denied participation in designing the
framework governing collective bargaining on wage increase and total labour cost
control. As to the significance of the role left to collective bargaining concerning
these matters, the Committee notes that, while the Government indicates that the Budget
Guidelines set the rate of increase in total labour cost commonly applied to all public
institutions, and each public institution can freely decide payment methods and the
amount of the wage based on labour-management agreements, considering its
characteristics and the total labour cost limit, the complainants state that individual
public institutions do organize collective bargaining annually, but only after each
year’s Budget Guidelines are released, determining the maximum rate of increase in the
total labour cost. Collective bargaining is then used to decide how to allocate the
total labour cost budget that has been established without consulting unions. It also
notes the complainants’ indication, that the agreement concerning wage increases in
KORAIL Networks which was concluded in November 2019, was finally not fully implemented
on the grounds that it provided for an increase rate that went beyond the limit set in
the 2020 Budget Guidelines. The Committee further notes the Government’s indication that
in 2021 three – out of more than 300 – institutions went beyond the total labour cost
limit provided in the Budget Guidelines.
- 485. Concerning the inclusion of the amount of court-ordered damages paid
to workers following ordinary wage lawsuits in total labour costs, which the Government
confirms is intended to induce public institutions that have not already done so to
amend their wage system, for example by encouraging the use of annual leave and reducing
overtime work to prevent lawsuits, the Committee notes that this was introduced through
the removal of the relevant exception from the 2022 Budget Guidelines. The Committee
notes that the Government indicates in this regard that considering equity and fairness
towards other institutions that had already revised their remuneration regulations, the
eight years exception was abolished in 2022 after “collecting opinions from related
agencies”, but it does not indicate if workers’ organizations were also consulted in
this regard. It notes that the complainants allege that there was not a single
opportunity by which unions could voice their opinions or participate in the making of
the 2022 Budget Guidelines. As to the significance of role left to collective bargaining
concerning this matter, the Committee notes that the Government indicates that in the
case of “other” lawsuits related to wages and labour cost, individual institutions take
measures after an autonomous agreement between labour and management; while additional
wages paid according to the results of ordinary wage lawsuits from 2022, are included in
total labour cost limit. The Committee thus observes that, as from 2022, there would
appear to be no role for autonomous management labour agreements in relation to the
source of payment of the second category and the impact that may have more globally on
working conditions.
- 486. Regarding the amount and differential distribution of the variable
component of wages, namely performance incentives/bonuses – which the Committee notes
constitute a significant part of the total wage – the Committee notes that the Budget
Guidelines, which the Government confirms are drawn up without participation of workers’
organizations, set the general rule of differential distribution. As to the link between
management performance evaluation score and the amount of bonus paid to the workers of
the evaluated institutions, the Committee notes the complainants’ allegation, which is
not challenged by the Government, that the relevant standard was formulated in the
document entitled “Reform Measures for Management Performance Evaluations of Public
Institutions”, without the participation of unions. Regarding the role left to
collective bargaining on this matter, the Committee notes the complainants’ indication
that public institutions indeed decide how to calculate the amounts of performance
incentives as well as when and to whom they are to be paid in accordance with the
collective agreements with unions or the rules of employment devised in consultation
with unions, however, the complainants emphasize that the framework set by the
Government Guidelines determines much of the rules.
- 487. Concerning wage peaks, the Committee notes that according to the
Government, they were first introduced in 2016 with the agreement of tripartite groups
aiming at harmonizing the extension of the retirement age with the amendment of the
“Prohibition of Age Discrimination in Employment and Elderly Employment Promotion Act”
(EEPA). The Government further adds that in 2021 the Second Public Institution Council
facilitated a survey on public institutions’ wage system and wage peak system. The
Committee notes however that the complainants present the situation differently in this
regard alleging that: the MOEF first finalized and distributed the Recommendations
Concerning Wage Peaks in Public Institutions on 7 May 2015 requiring all public
institutions to adopt wage peaks. This was also integrated as an indicator into the
Management Performance Evaluation Manual as revised and published in September 2015, and
by the end of that year all 313 subject institutions had adopted the new policy. The
complainants state that the EEPA requires the employers and the unions of the
enterprises that extend their retirement age to take necessary measures, including the
“restructuring of their wage system”, without making any reference to wage peaks. The
complainants add that the 2015 Recommendation was revoked in 2018, but the wage peaks
remained as a recommendation in the Management Guidelines released that year and are
also maintained in the management performance evaluation manuals released since then. As
to the role left to collective bargaining in introduction of wage peaks, the
complainants indicate that as a change in the conditions of employment that clearly
disadvantages workers, the law requires the union/workers’ consent for its application
within an enterprise, but unions at most public institutions in Korea feel pressured
into accepting wage peaks so that their respective employers can fare well on management
performance evaluations. The Committee also notes the Government’s indication that the
details of the wage peak system, including payment rate and the period for adjustment
can be designed reasonably by considering the age distribution and wage system of each
institution and is decided upon the agreement of workers and employers of each
institution.
- 488. Regarding the replacement of seniority-based wage system by
performance-based wage system, the Committee notes the complainant’s indication that the
Government announced its decision to transform the remuneration system in the public
sector to prioritize performance and skills more and declared its plans to support and
incentivize job analysis to prepare for the shift to job-based pay in public
institutions in the 2020 Economic Policy Direction published in December 2019. The
Committee further notes that according to the complainants, the Joint Action Committee
for Public Sector Unions, an initiative of the KCTU and the FKTU, released a statement
in May 2020 urging the Government to stop unilateral efforts for wage reforms and to
refrain from pushing for the revision of relevant management performance evaluation
indicators, affirming that any discussion on wage reforms should proceed through
dialogue between the representatives of workers, including those representing the five
industry level trade unions and federations (the KCTU and the FKTU), and the Government.
The complainants add that despite this call for dialogue, in September 2020 the MOEF
released a revised edition of the Management Performance Evaluations Manual which
contained a new criterion in wage management indicators concerning “efforts and outcomes
for transitioning into a more rational, job-based remuneration system” without having
consulted labour representatives. The Committee notes that the Government indicates that
in November 2020 the ESLC established the Public Institution Council, a tripartite body,
with a view to making efforts to revamp the wage system of public institutions to
reflect the objective value of the job to it. It also refers to the survey facilitated
by this tripartite body concerning the public institutions’ wage system and the report
produced on that basis in March 2022. As to the role left to collective bargaining in
regulating the transition, the Committee notes that the complainants indicate that the
revised Management Performance Evaluation Manual also assigned points to the revision of
remuneration policy “on the basis of consent from labour”, which, according to the
complainants, would ultimately prevent unions from voicing their complaints on this
topic so as not to compromise the management performance evaluation score. The Committee
also notes that the Government indicates that in November 2020, the ESLC agreed on the
principle that restructuring of the wage system will be implemented autonomously and
gradually through the agreement of labour and management in each public institution,
rather than in a unilateral and standardized way. The Committee recalls that in Cases
Nos 3237 and 3238 that were lodged in 2016, it had examined allegations concerning the
introduction of the performance-based wage system by certain public institutions without
the employees’ consent, after the Government had issued unilaterally drafted
recommendations in January 2016, providing for incentives and penalties in relation to
this matter and the addition of a management performance evaluation indicator in this
regard. The Government had replied that to address the situation it had removed the
deadline for the introduction of the performance-based pay system; abolished the
penalties (such as freezing total labour costs budget); and removed the criteria of the
implementation of the new system from the assessment of public institutions index. The
Committee had welcomed “the Government’s removal of intrusive penalties and incentives
with a view to allowing the parties to restructure their wage systems autonomously on
the basis of freely reached agreements between labour and management” [Case No. 3237,
386th Report, para. 200 and Case No. 3238, para. 290].
- 489. Finally, concerning the tightening of conditions of allocation of
in-company loans, the Committee notes that the standards initiating change in this
regard were introduced in the 2021 Innovation Guidelines and were also reflected in the
indicators of the Management Performance Evaluation in the Manual released the same
year. As to the role left to collective bargaining regarding this matter, the Committee
notes that the complainants indicate that the labour community strongly criticized this
intervention as a violation of free negotiation between employers and unions, but the
MOEF rejected the criticism responding that the Guidelines are non-binding. According to
the complainants, public institutions and their unions had to enter collective
agreements downsizing the availability of in-company loans, because they sought to avoid
losing management performance evaluation points. The Committee notes however, that the
Government indicates that modification of the internal regulations of public
institutions on conditions of allocation of in-company loans requires the consent of
unions and they can freely practice their right to collective bargaining in this regard
despite the Innovation Guidelines. The Government further affirms that in 2021, many
public institutions applied criteria on inter-company loans that did not comply with the
Guidelines.
- 490. In view of the foregoing, the Committee notes that the standards set
in Government Guidelines in relation to the issues raised in the complaint, indeed
constitute a framework that in several respects limits the content of collective
bargaining at the individual institution level, although collective bargaining maintains
a role in many aspects relating to the determination of the modalities of implementation
of the general principles formulated in centrally issued recommendations. The Committee
expresses its concern that the combined effect of many of the recent recommendations
limits the effective space for collective bargaining and does so on the basis of
guidelines over which there has been no recent consultation or workers’
participation.
- 491. The Committee recalls that Case No. 2829 concerning the Republic of
Korea, which was lodged in 2011, contained similar allegations relating to the
restriction of collective bargaining in public institutions by means of “management
directives” and “management evaluation”. On that occasion, the Committee, while being
mindful of the fact that collective bargaining in the public sector calls for
verification of the available resources in the various public bodies or undertakings,
requested the Government to ensure that trade unions are consulted prior to adopting
measures such as the issuance of budgetary guidelines regarding public institutions and
the assessment of the soundness of their financial situation though performance
management evaluation reports, audits or inspections [365th Report, para. 582(a)].
Furthermore, in Case No. 3237, the Committee recalled that tripartite discussions for
the preparation, on a voluntary basis, of guidelines for collective bargaining were a
particularly appropriate method for resolving the difficulties raised in the allegations
and invited the Government to take the necessary measures so that reviews of the pay
system may take place through collective bargaining [386th Report, para. 201]. Finally,
the Committee recalls that measures should be taken to encourage and promote the full
development and utilization of machinery for voluntary negotiation between employers or
employers’ and workers’ organizations, with a view to the regulation of terms and
conditions of employment by means of collective agreements [see Compilation of Decisions
of the Committee on Freedom of Association, sixth edition, 2018, para. 1231].
- 492. The Committee notes that in the present case, the complainants refer
to the absence of channels of participation and communication for unions and indicate
that the Government rejects the request of public sector unions to participate in
discussions on these matters at the central level. In particular in relation to the
ongoing replacement of seniority-based wage system by performance-based wage system, the
complainants refer to the 19 May 2020 statement of the Joint Action Committee for Public
Sector Unions affiliated to the KCTU and the FKTU, which urges the Government, as the de
facto employer of public sector workers in public institutions, to engage in a
centralized dialogue with representatives of workers, including the five industry level
unions and federations. The Committee notes the Government’s reply indicating that the
parties to collective bargaining are workers’ and employers’ organizations, not the
Government.
- 493. The Committee recalls in this regard that it has always emphasized
the importance it attaches to the promotion of dialogue and consultation on matters of
mutual interest between the public authorities and the most representative occupational
organizations of the sector involved; and in the case concerning the public corporate
sector, it highlighted the importance of making changes to working conditions such as
cuts to wages and other allowances and benefits the subject of in depth consultation
with the most representative organizations in the sector [see Compilation, paras 1523
and 1528]. The Committee therefore considers that the Government should refrain from
formulating “recommendations” enforced through management performance evaluation
indicators concerning terms and conditions of employment in public institutions without
the workers’ participation. In the Committee’s view, to ensure the meaningful
participation of workers’ organizations in designing the overall bargaining framework
that is formulated at the central level, the Government should establish a regular
consultation mechanism that would allow full and meaningful participation of workers’
organizations on the matters raised in the complaint so as to ensure that guidelines
issued at central level do not effectively interfere with collective bargaining on the
terms and conditions of employment in public institutions. The Committee requests the
Government to keep it informed of the measures taken in this regard.
- 494. The Committee notes the complainants’ allegations related to Case
No. 1865 and the Government replies thereto, which it will consider in the framework of
its examination of that case.
The Committee’s recommendation
The Committee’s recommendation- 495. In the light of its foregoing conclusions, the Committee invites the
Governing Body to approve the following recommendation:
- The Committee requests
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 on the matters raised in the complaint, so as
to ensure that the guidelines issued at central level do not effectively interfere
with collective bargaining in public institutions. The Committee requests the
Government to keep it informed of the measures taken in this regard.
