Upcoming 'Yellow Envelope' Act driving higher subcontractor bonuses, employer concerns

Home > Business > Industry

Upcoming 'Yellow Envelope' Act driving higher subcontractor bonuses, employer concerns

Published: 21 Dec. 2025, 07:00

Audio report: written by reporters, read by AI

Members of the Hyundai Steel and Hanwha Ocean irregular workers' union of the Korean Metal Workers' Union are seen during a press conference demanding negotiations with the general contractor in front of the Ministry of Employment and Labor building at the government complex in Sejong on Dec. 15. [NEWS1]

With the so-called Yellow Envelope Act — amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act — set to take effect in March next year, disputes over “subcontractor bonuses” are heating up.

A recent announcement by Hanwha Ocean to match the bonus rates of its subcontractor employees to those of its own staff has triggered renewed attention, signaling a potential shift in the traditional bargaining structure between principal contractors and subcontractors.

Last Friday, Hanwha Ocean announced that it would align the bonus rates for employees of its in-house subcontractors with those of the company’s own employees.

For example, last year, Hanwha Ocean employees received bonuses equivalent to 150 percent of their base salary, while subcontractor employees received around half that amount — roughly 75 percent. The new policy means that some 15,000 subcontractor employees will now receive bonuses at the same rate as their counterparts at Hanwha Ocean.

This move, in which the principal contractor directly guarantees the bonus level of subcontracted workers, could be interpreted as strengthening the principal’s role as a de facto employer.

Typically, large conglomerates have supported subcontractor welfare indirectly — for instance, through contributions to co-prosperity funds. Direct involvement in wages and bonuses, however, raises questions about the principal’s legal status as an employer of subcontracted labor.

Hanwha Ocean's shipyard in Geoje, South Gyeongsang is seen on Nov. 27. [YONHAP]

“Since the bonus announcement, we’ve seen a flood of questions at worksites over eligibility, exclusions and whether years of service will affect the amounts,” the Hanwha Ocean Subcontractor Chapter of the shipbuilding workers’ union said in a statement issued on Monday. “These matters should be settled through collective bargaining.”

The union also submitted a request for dispute mediation to the National Labor Relations Commission on Wednesday.

President Lee Jae Myung praised the move in a recent Ministry of Employment and Labor policy briefing, calling it “desirable.”

That endorsement may set a kind of guideline for labor-management relations — particularly in the manufacturing sector, where principal-subcontractor structures are common in industries such as shipbuilding, automotive and steelmaking.

Last Friday, the nonregular workers’ union chapter at Hyundai Motor held a rally in front of the company’s Ulsan plant, demanding that “the real boss, Hyundai Motor, step up and raise our bonuses.”

These subcontracted workers are not directly employed by Hyundai Motor but work at its plants in cleaning, security and food services. They are reportedly demanding bonuses at a similar rate to Hyundai Motor’s full-time employees, who are set to receive bonuses worth 450 percent of their base pay. Their demand is directed at Hyundai Motor, not their immediate subcontractor employers.

“Starting with Hyundai, we’re likely to see more subcontractors demand negotiations with the ‘real boss’ after March next year,” said a senior executive at a steel company.

With local elections scheduled for June, more such demands may emerge from subcontracted workers in key industrial regions.

Kim Jong-hoon, mayor of Dong District in Ulsan, where HD Hyundai Heavy Industries is located, urged the company to “follow Hanwha Ocean’s lead and give subcontractor employees the same bonuses as full-time workers.”

Hyundai Motor Group Executive Chair Euisun Chung is seen surrounded by press during an 80-year anniversary ceremony at a venue in Yongin, Gyeonggi on Dec. 5. [YONHAP]

The issue is that under the Yellow Envelope Act, large corporations could be forced into a corner when subcontractor unions demand higher bonuses. If a subcontractor union successfully argues that the principal contractor is a legal employer, then that principal could be required to sit at the bargaining table.

“They may initially raise issues like industrial safety — where employer responsibility is more easily recognized — and then use that as a lever to demand bonus increases in negotiations,” said a labor affairs executive at a major company.

A total of 87 percent of 100 companies with annual sales exceeding 500 billion won ($337 million) expected the Yellow Envelope Act to negatively impact labor-management relations, according to a recent survey by the Korea Enterprises Federation.

Among the anticipated challenges, 74.7 percent cited “increased bargaining demands and negotiation requests from subcontractor unions targeting principal contractors” and 64.4 percent pointed to “a rise in legal disputes over actual control due to ambiguities in the law.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM KI-HWAN [[email protected]]