Collective Agreement
Collective Agreement
What is a collective agreement?
- It must be in writing, with signatures and seals
- Working-condition provisions take precedence over the rules of employment and employment contracts
- Managing the term and compliance is what matters in practice
Signing a collective agreement does not simply add one more company rule; part of the existing rules is voided on the spot. Any provision of the rules of employment or an employment contract that falls short of the agreement's standard becomes void, and the agreement's wording fills the gap. So the first job after signing is not to celebrate but to overhaul the rules of employment, HR policies, and payroll system in one sweep. When a single allowance rate changes, the ordinary wage formula, severance pay, and overtime rates all move in a chain, so the right order is to run a labor-cost simulation before finalizing the wording.
Numbers matter for duration and scope. The maximum term was raised from 2 years to 3 years by the 2021 amendment, and an agreement with no stated term, or one exceeding the limit, is treated as a 3-year agreement. If no new agreement is reached after expiry, the previous one stays in effect for 3 months. Where an automatic-renewal clause exists, either party must give written notice of termination 6 months in advance to end it. Coverage is not limited to union members either: if it applies to a majority of similar workers at a workplace, it extends to the remaining non-union workers as well.
The nature of each clause also matters. The normative part, which sets working conditions such as wages, working hours, and retirement age, remains part of individual employment contracts even after the agreement ends. The obligatory part, such as providing a union office or labor-management consultation procedures, disappears when the agreement expires. The peace obligation comes from here too: reopening matters already settled during the term and launching industrial action costs the action its legitimacy. For an unlawful agreement, the administrative authority can order correction after a resolution by the Labor Relations Commission, and failing to comply with a correction order is a criminal offense.
The costliest misconception in practice is "let's put it in now and fix it later." Once signed, an agreement can't be changed by even a word without the other side's consent, and it runs as written for up to 3 years. If you write 'union consent' into layoffs or job reassignments, you can't touch a line even when volume falls by half. Clauses such as priority hiring for union members' children have been ruled invalid by courts. The opposite belief, "it all disappears when it expires," is just as risky. Only the obligatory provisions lapse; normative provisions such as wages and retirement age survive as terms of the employment contract, so a single termination notice does not restore the previous conditions. Details may change, so check the latest statutes.
Jongmu KimCorporate talent development and job skills specialist
Kyungtae KimHR expert · Organizational culture and HR strategy consultantThe Trade Union and Labor Relations Adjustment Act requires collective agreements to be in writing and signed or sealed, gives the working-conditions portion normative effect, and sets a maximum term and the rules for what happens after expiry.
Company A, an auto-parts manufacturer, has 420 employees, 250 of them union members. Its collective agreement, signed in July 2022, reaches its 3-year limit at the end of June 2025. Because of a clause added in the last round of bargaining to head off a strike, requiring 'union consent for layoffs and job reassignments,' the company had been unable to touch staffing on Line 2, where orders had dropped 30%, for 8 months. (Hypothetical example)
- When the HR director put the 47 clauses of the current agreement into a table and color-coded whether each was being honored, 9 clauses had gone unfulfilled for all 3 years, and 6 of those involved spending training and welfare budgets.
- The advisory labor attorney pointed to the automatic-renewal clause and stressed, "If written notice of termination isn't sent by December 31, it carries over for another year on the same terms." The manager put that date at the very top of the bargaining schedule.
- When the idea of changing 'consent' to '90-day prior consultation' came up in a preliminary meeting with the union president, the reaction was "Isn't that telling us to disarm?" The company put full coverage of training costs for reassigned employees and six months of wage protection on the table in exchange.
- At a management meeting, the finance team presented figures showing that accepting all of the union's demands would raise annual labor costs by KRW 1.1 (≈ US$1) billion, up 3.8% of the total, and KRW 3.3 billion (≈ US$2,469,000) cumulatively over 3 years. The CEO said, "This isn't a one-year signature, it's a three-year one," and told the team to negotiate wage increases separately from which clauses stay.
- The 5th round of bargaining produced a deal. Clauses dropped from 47 to 43, unfulfilled clauses from 9 to 1, and the time needed to reassign Line 2 staff from 4 months to 6 weeks.