GM Korea could see 15% labor cost increase following high court ruling

Article by Christian A., on June 3, 2014

Sergio Rocha, chief executive of GM Korea, disclosed that labor costs in the country may surge 15 percent. Because of this, he described the 2014 wage negotiation as the most critical negotiation that the carmaker will have with the local union. In an interview with Bloomberg, Rocha said he will do “everything possible and impossible” to guarantee that GM has a sustainable future.

Companies in South Korea are clenching their teeth for higher labor costs after the Supreme Court ruled in December 2013 that periodic bonuses and other compensation should be counted in workers’ base pay.

The Hyundai-Kia group is also facing unions in court over the same matter. Rocha remarked that including bonuses and other benefits into the base pay will make labor cost grow substantially, noting that ruling is not good for GM Korea, for the industry, and for Korea Inc.

South Korea’s Supreme Court ruled in favor of employees of KB AutoTech Co., who filed a lawsuit against South Korea-based parts maker in July 2010 to have the bonuses they get every other month included as part of their base pay.

The court, however, dismissed workers’ claims that seasonal allowances and welfare benefits should also be integrated in wages.

The ruling will mean at least KRW13.75 trillion ($13.5 billion) in added annual labor costs for companies, according to estimates by the Korea Employers Federation in December 2013.

According to Rocha, an increase in base salaries hikes overall wage costs since they are used to calculate everything from overtime payments to annual raises. [source: Bloomberg]

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Topics: gm, south korea

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