On February 28, 2018, the National Assembly of Korea passed legislative amendments designed to reform the Labor Standards Act. We have summarized the notable changes below, and if you have any questions on any of these changes, please do not hesitate to contact us.

1. Redefining the "Workweek" and Reducing the Maximum Weekly Work Hours from 68 to 52 hours

Current Amended
  • "Workweek" is interpreted by the Ministry of Employment and Labor as referring to five (5) workdays (e.g., Monday – Friday) with up to 12 hours of overtime permitted per week.
  • Therefore, employers are allowed a maximum of 68 working hours per week (i.e., 40 hours on weekdays, 12 hours of overtime per week, 8 hours on Saturdays and 8 hours on Sundays), assuming the typical Monday – Friday workdays.
  • "Workweek" is defined as seven (7) days, including weekends (Monday – Sunday) while weekly overtime remains limited to 12 hours per week.
  • Therefore, employers will be limited to a maximum of 52 working hour per week (i.e., 40 hours for the entire workweek + 12 hours of overtime).

The effective dates of the amendment would depend on the size of your business as follows:

  • July 1, 2018: Businesses with 300 or more employees.
  • January 1, 2020: Businesses with 50 to 299 employees.
  • July 1, 2021: Business with 49 or fewer employees.

Limited Exception. From July 1, 2021 – December 31, 2022, employers with fewer than 30 employees may enforce eight (8) extra work hours per workweek in addition to the 52-hour limit via a separate written agreement with the employee representative).

2. Curtailing the Number of Business Categories Exempt from the Weekly Work Hour Limit

Current Amended
  • Businesses that operate within one of twenty-five (25) enumerated industries are exempt from the 12-hour limit on the weekly overtime hours.
  • These industries include sales, finance insurance, film production, telecommunication, education/research, advertisement, and hospitality industries.
  • Exempt industries are curtailed to just five (5) industries (i.e., land transportation (excluding bus companies), marine transportation, air transportation, other transportation services (e.g., parcel delivery) and healthcare industries).
  • Exempt employers must also allow at least eleven (11) consecutive hours of rest before each workday.

The effective date of the amendment is September 1, 2018.

3. Statutory Allowance for Work less than 8 hours on Days-Off/Holidays remain at 150%

Current Amended
  • On-going debate over whether work performed on a day-off or holiday (beyond the 40-hour limit per workweek) is eligible for both overtime and holiday work allowances.
  • An employee who works for less than eight hours on a day-off or holiday is entitled to 150% of his/her ordinary-wage as holiday allowance.
  • An employee is entitled to 200% of the ordinary-wages only when he/she works for more than eight hours on a day-off or holiday as both overtime and holiday work.

The amendment is effective from the date of promulgation and will apply to all day-off or holiday work performed thereafter. However, whether the rule would apply to work that has already been performed on a day-off or holiday remains to be decided by the Korean Supreme Court. Please be advised that if the Supreme Court holds that employees may be entitled to both overtime and holiday work allowances for certain hours of day-off/holiday work performed, employers could be liable for any differences in wages going back up to 3 years (i.e., the statute of limitations for wage claims).

4. Ordinance concerning Holidays of Government and Public Officers to apply to the Private Sector

Current Amended
  • Ordinance concerning Holidays of Government and Public Officers ("Ordinance Holidays") stipulate public holidays that are mandatory for the public sector.
  • Recognition by the private-sector is optional.
  • Ordinance Holidays shall be mandatory public holidays for private-sector employers as well.

The new law seeks to address the disparity between public and private-sector employees, and shall go into effect starting from January 1, 2010, depending on the size of a business. Please be advised that the new law would have no impact for employers that already recognize the Ordinance Holidays as paid holidays per their respective rules of employment or other holiday policies.

5. Potential Impacts on Your Business

The new legislation is projected to significantly impact all industries and levels. According to a study by the Korea Economic Research Institute, the additional annual labor costs companies would incur is likely to exceed KRW 12 trillion (USD 11 billion) in total.

At this time, we advise that all businesses:

  1. Monitor the working hours of employees to ensure that your business does not exceed the reduced limit on weekly work hours;
  2. Review your internal policies to gradually adjust to the new legislative requirements by reducing extended work hours, reviewing existing comprehensive wage systems (if any) and the work hours recognized thereunder, and/or introducing a compensatory holiday system to offset the additional labor costs caused by the reduced limit on weekly work hours;
  3. Consider introducing greater flexibility in employee work hours via a selective work hour system or comprehensive work hour system;
  4. Review holiday policies to ensure that all Ordinance Holidays are recognized as paid annual holidays or introduce alternative measures such as substitute holiday systems; and
  5. Prepare budgeting and contingency plans for aggressive demands from employees in future collective and wage agreement negotiations in light of the legislative changes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.