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Park Chan-kyong

Barely four months into its implementation, South Korea’s new labour-friendly law is coming under growing scrutiny as workers’ demands for bonuses tied to a fixed percentage of corporate profits spread across the country.
If left unchecked, critics warn, the revised Trade Union and Labour Relations Adjustment Act – commonly known as the Yellow Envelope Act – could fuel labour disputes, create uncertainty for businesses and threaten an economy that is only beginning to recover.
At the heart of the controversy is whether calls for bonus adjustments and other such demands fall under the new act, which has expanded the scope of labour disputes beyond traditional issues such as wages, working hours, welfare and dismissals to include “business management decisions affecting working conditions”.
That broader definition has emboldened some unions to make demands that would previously have been considered beyond their collective bargaining remit.
Samsung Electronics’ labour union, for example, has argued that the company’s planned 800 trillion won (US$545 billion) investment in a new semiconductor manufacturing complex in the southwestern city of Gwangju should require union approval because it could affect employees’ working conditions through relocation and reassignment.
The controversy over profit-linked bonuses began at SK Hynix, which agreed last year to remove its previous cap and allocate 10 per cent of annual operating profit to an employee bonus pool for the next decade.

Following the threat of strike action, Samsung Electronics reached a similar agreement in May, earmarking more than 10 per cent of the semiconductor division’s performance bonuses for a new 10-year programme paid entirely in company shares.
Those deals have encouraged unions at other major companies to seek similar arrangements.
Among them are Hyundai Motor, whose union is demanding bonuses equivalent to 30 per cent of net profit; HD Hyundai Heavy Industries, where workers are seeking 30 per cent of operating profit; retail conglomerate Shinsegae, where the demand is 15 per cent of operating profit; and telecoms operator LG Uplus, where workers are also seeking 30 per cent of operating profit.
In the latest dispute, workers at Leeno Korea, Busan’s largest listed company and a manufacturer of semiconductor testing components, walked off the job on Thursday.
The union is demanding that performance bonuses be fixed at 800 per cent of base salary and additional benefits equivalent to 15 per cent of the company’s operating profit be paid each year. Management has rejected the demands as financially unsustainable.
Blurred boundaries
Song Heon-jae, a business administration professor at the University of Seoul, warned of a potential crisis.
“A small number of highly profitable semiconductor companies may be able to afford such generous bonus schemes. But most Korean companies, many of which are struggling to remain competitive, simply cannot absorb demands for bonuses linked to a fixed percentage of operating profit,” he said.
The revised law has become a new source of conflict because it is unclear where the boundary should be drawn between legitimate management decisions and issues subject to collective bargaining, according to Song.
“Militant labour unionism appears to be making a comeback in South Korea,” he said.
Organised labour has gained influence under Employment and Labour Minister Kim Young-hoon, a former prominent activist who supports strengthening workers’ rights.
Against that backdrop, President Lee Jae Myung has sought to draw clearer boundaries.
“Is the issue of distributing a certain percentage of operating profit truly a subject for industrial dispute? I believe it is more likely that it is not,” Lee said at a cabinet meeting on Tuesday, warning that the scope of industrial disputes was expanding too broadly.

Citing Samsung Electronics’ labour union’s claim that the Gwangju complex should be subject to negotiation because the project could result in employee relocation, he said: “If we follow that logic, the exercise of management rights by any company would become subject to disputes.”
The president said that rather than leaving such questions entirely to the courts, the executive branch should clarify the law through enforcement decrees and administrative guidelines.
Labour organisations immediately rejected Lee’s interpretation, arguing that the expanded scope under the amended Yellow Envelope Act included business management decisions affecting working conditions.
The Federation of Korean Trade Unions warned that enforcement regulations or administrative guidelines would effectively reverse the legislature’s expansion of workers’ fundamental rights.
The Korean Confederation of Trade Unions likewise accused the government of attempting to undermine a law achieved through years of labour activism by limiting its practical application through administrative measures.
‘Serious hurdle’
Labour lawyer Kim Hye-rim also argued that Lee’s interpretation was inconsistent with lawmakers’ intent.
By explicitly adding “business management decisions affecting working conditions” to issues previously limited to the “determination of working conditions”, the legislature clearly intended to broaden the range of what could become the subject of industrial disputes, she said.
The opposition People Power Party accused Lee of contradicting legislation that his own administration had championed. “After forcing through the Yellow Envelope Act, the president is now interpreting the law in a way that suits his own interests, bringing about clashes with labour unions,” the party said.
To add to the uncertainty, the revised law also allows labour unions representing subcontractors to negotiate directly with major purchasing companies such as Samsung Electronics and Hyundai Motor, said Sejong University business management professor Kim Dae-jong.
“The new labour law poses a serious hurdle for the country’s economy,” he said.

South Korea’s outward foreign direct investment reached around US$37.7 billion in 2025, more than double the US$18 billion in foreign direct investment that entered the country on an implemented basis.
The professor said only about 44 per cent of university graduates secured employment, arguing that rigid labour regulations remained one of the factors discouraging investment and job creation.
The Ministry of Employment and Labour is now reviewing the revisions, with officials expected to clarify that demand for profit-linked bonuses is not a matter for industrial disputes.
That might become another source of conflict in itself because administrative interpretations carried less legal authority than the statute, experts said. As a result, differing interpretations by labour and management could trigger a wave of litigation.
“South Korea is going through an inevitable adjustment period as it searches for a new balance of power between organised labour and corporate management,” Song said.
“The government and the ruling Democratic Party should amend the Yellow Envelope Act to eliminate the legal ambiguities that are fuelling confusion and industrial disputes.”


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Without clearer boundaries, the revised act could fuel labour disputes and create uncertainty for businesses and the economy, critics warn


Without clearer boundaries, the revised act could fuel labour disputes and create uncertainty for businesses and the economy, critics warn.


South Korean unions use new labour rules to push envelope on bonus demands

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Without clearer boundaries, the revised act could fuel labour disputes and create uncertainty for businesses and the economy, critics warn

Without clearer boundaries, the revised act could fuel labour disputes and create uncertainty for businesses and the economy, critics warn