SEOUL (Reuters) -- South Korean railway workers started a strike over pay and working conditions on Wednesday, defying a government arbitration order and halting hundreds of services, the state-run railway corporation said.

But another union representing subway workers struck a last-minute deal with the management before dawn, averting a separate planned strike on Seoul's subway system.

A railway corporation official said the rail union and management had yet to resume talks, despite reports that they had returned to the negotiating table.

"We have a strike, and the 9 A.M. (0000 GMT) deadline for the workers to return to work has passed," the official said by telephone from the railway corporation's headquarters in Taejon, south of Seoul.

"Those who continue to stay off the job face punishment, including dismissal," he said requesting anonymity.

The union is demanding the reinstatement of previously dismissed workers, higher wages and better working conditions, but a strike defying a government arbitration order is illegal under South Korean laws.

The management has called in substitute workers, including retirees and military engineers, to try to keep as many trains running as possible, the railway official said.

The strike began on a holiday in South Korea when there are fewer scheduled train services and lighter passenger and cargo loads, but if the stoppage continues into Thursday it could throw the transport system into chaos.

More than half of the 760 scheduled services will not run, the railway corporation said.

The railway workers' union said it had done its part to try to avert a strike by agreeing to put off a stoppage originally planned for December and continue negotiations.

"But unfortunately, the corporation has not budged at all and now the trains have stopped," a union official, Paek Nam-hee, said by telephone in Seoul.

More than 17,000 of its 25,000 members have walked off the job, Paek said, and more were expected to join.

The railway corporation put the number of workers on strike at about 16,300.

About 380 cabin attendants on South Korea's bullet trains have been barred from working since Saturday after refusing to wear uniforms in a protest over job security, back wages and better working conditions.

On Tuesday, the Korean Confederation of Trade Unions (KCTU), an umbrella labor group, called for a general strike in protest of a proposed bill pending passage in parliament that it said cuts job security of temporary workers.

KCTU members at Hyundai Motor Co. held a partial strike on Tuesday and will continue their protest on Thursday, a union official said.