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All about Investment in Korea

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Labor Environment

  • Ⅴ. The labor environment in Korea

    1. Labor-related laws in Korea

      In Korea, there are several laws regarding labor instead of a single labor act and those laws are commonly called as the “labor act”.

      The labor act consists of “Labor Standards Act” on respective labor contract relations, “Trade Union and Labor Relations Adjustment Act” for collective labor-company relations”, and special protective regulations on maternal health and various employment types such as “Equal Employment Opportunity and Work-family Balance Assistance Act”, “Act on the Protection of Fixed-term and Part-time Employees”, “Act on the Protection of Fixed-term and Part-time Employees”. Korea also promotes harmonization between labor and company with the “Act on the Promotion of Employees' Participation and Cooperation” and makes efforts to reinforce workplace safety with the “Occupational Safety and Health Act”, “Industrial Accident Compensation Insurance Act”, and “Serious Accidents Punishment Act”.

    2. Labor act regulations regarding employment

    (1) Labor Contract
      Article 17 of the Labor Standards Act specifies that when the employer hires an employee, essential labor conditions shall be prepared in writing and signed by both parties and the labor contract shall be handed over to the employee, and if this is violated, the employer shall be punished. The essential labor conditions that must be included in the labor contract include wage, prescribed working hours, holidays, and paid annual leave, and for the wage, components for the wage, calculation method, and payment method shall be included in detail.

    (2) Working hours and recess hours
      Since Korea has the 2nd-longest working hours in OECDs, labors work for relatively longer hours compared to those in other countries. Article 50 of the Labor Standards Act limits working hours to 40 hours a week and 8 hours a day and prescribes that this shall not be exceeded. The employer and employee may determine when and for how long he or she will work by the means of the labor contract, but it shall be determined within the legal working hours, and this is called ‘prescribed working hours'. In addition, the working hours refer to any hour an employee is scheduled to be on duty in an office except the recess hours. Inaddition, Article 54 of the Labor Standards Act states that an employer shall allow employees a recess of not less than thirty minutes in cases of working for four hours, and recess hours may be freely used by employees.

    (3) Holidays
      Holidays are days when workers are not obliged to work, and there are two types: statutory holidays and contractual holidays. Statutory holidays are holidays that are established by laws and regulations, while contractual holidays are days agreed upon by the employer and the employee to be designated as holidays. Statutory holidays include "weekly holiday" which is a paid day off given when an employee has worked for one full week, as well as "Labor Day" and "National Holidays." Contractual holidays may vary depending on each workplace, but a common example is when a company designates its founding anniversary as a holiday.

    (4) Paid Annual Leave
      Annual paid leave is a system of rest prescribed by Article 60 of the Labor Standards Act that provides 15 days of paid leave to workers who have worked continuously for one year or more, and one day of paid leave for each month of full attendance for workers who have worked less than one year. However, even for workers who have worked for more than one year, normal vacation is granted only if they have worked for more than 80% of the year. If they have worked less than 80% of the year, they should be granted the same amount of vacation as workers who have worked for less than one year. Annual paid leave can be used within one year from the day it is accrued, and any unused leave within the one-year period must be compensated. It is important to note that the vacation time accrued by workers who have worked less than one year, receiving one day of leave per month of full attendance, can be used for up to one year from their employment date. This means that the 15 days of annual leave granted after working for one year or more have a different usage period.

    (5) Termination of Labor Relations
      There are three types of situations in which a labor contract may come to an end: first, "dismissal" in which the employer unilaterally ends the contract at its own discretion; second, "resignation" in which the employee voluntarily ends the contract; and third, "automatic termination" in which the contract is automatically terminated when certain circumstances arise regardless of the intentions of the parties involved. Automatic termination occurs when the contract period expires, when the employee reaches retirement age, when the workplace closes, or when the employee dies. However, if the employer tries to include other reasons for automatic termination in the contract, they would not be legally effective and could be treated as dismissal or resignation.

    3. Recent Issues

    (1) Workplace Safety Enhancement
      South Korea is currently emphasizing the enhancement of workplace safety management obligations in order to reduce the incidence rate of industrial accidents and prevent avoidable accidents. The Industrial Safety and Health Act establishes a basic safety management system, and in the event of industrial accidents, the Industrial Accident Compensation Insurance Act provides support for injured workers. Since January 27, 2022, the Serous Accidents Punishment Act has been enacted and enforced, which aims to prevent major accidents in workplaces and strengthen penalties for employers in case of occurrence.

    (2) Flexible Working Hours
      South Korea has institutionalized the flexible working hour system, the selective working hour, the considered working hour system, the discretionary working hour system, and the compensated leave system to promote flexible working hours. The government is also making efforts to legislate systems that provide workers with autonomous working hour options and to manage working hours transparently as part of its task to reform the working hours system.
  • (*) The 52-hour workweek system
    Starting from July 2018, the 52-hour workweek system has been enforced in Korea.
    Initially, it was applied to public institutions, state-owned enterprises, and private companies with 300 or more employees. Since January 2021, it has also been applied to small and medium-sized enterprises. However, businesses with fewer than 5 employees are exempted from this system.
     
    What is the "Week 52 work system?
    The "Week 52 work system" refers to a labor system where the legal working hours per week are reduced from the previous 68 hours to 52 hours. The basic principle is that the maximum overtime hours are limited to 12 hours, with a limit of three months of overtime work every six months. To ensure flexibility, flexible work systems, special overtime work systems, and optional work systems are also being implemented.

    Recently, there has been resistance from labor groups and positive responses from management and business circles to the proposal of the Ministry of Employment and Labor to flexibly implement the Week 52 work system on a monthly basis instead of a weekly basis. The main content of the revised bill is to expand the management unit of overtime work from a week to a month, quarter, half-year, or year while maintaining the current maximum of 52 hours per week. When work is piled up, workers may work more than 52 hours per week, but they will work less when they have time to spare, so that the total actual working time does not increase.
     
    (*) Selective Working Hours
    The selective work hour system is a flexible work system in which employees can adjust and choose their work hours (workdays) for tasks other than the working hours (workdays) that the company has designated as mandatory. There are two types of selective work hour systems: the work hour selection type, where employees choose their daily work hours, and the workday selection type, where employees choose their workdays.

    Who mainly adopts the selective work hour system?
    The selective work hour system can be introduced in various professions, depending on the company's situation and conditions, including research positions, administrative management (financial transactions, administrative processing, etc.), and production positions. However, since differences in workloads can occur depending on the selected work hours (workdays), it is especially beneficial for professions such as software development, administrative management, research, design, and planning that allow for flexible work arrangements.

     
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