South Korea: Government Overhauls Labour Standards Act

Recent amendments to the Labour Standards Act implement a five-day working week and alter minimum standards for paid leave. Other measures are intended to preserve current levels of pay and hourly wages notwithstanding shorter work hours. The changes will apply from July 2004 to employers in the public and financial sectors, and to those employing at least 1,000 workers.

Maximum working hours
Under the existing provisions of the act, maximum working hours are 44 hours per week (42 hours for minors) and eight hours per day (excluding lunch and other breaks). The employee may agree to an additional 12 hours per week, for which he or she must be paid an additional 50% of his or her wages.

Under the new provisions of the act, a maximum 40-hour working week is imposed (including for minors). Within three years of the new provisions being implemented, employees may agree to an extra 16 hours per week, for which the employer must pay an additional 25% of wages for the first four extra hours (which may be overtime) and an added 50% for the remainder.

Flexible working
Currently, the maximum 44-hour week is flexible over a period of up to one month (ie, an employer may arrange for work in excess of 44 hours during one or more weeks within a one-month period without having to pay an additional 50% of wages, provided that average working hours during that period do not exceed 44 hours).

Pursuant to the amendments, the 40-hour maximum is flexible for up to three months. An employer need not pay extra wages for work of more than 40 hours per week over several weeks, if the average work hours for a three-month period including those weeks comprise 40 hours or less (however, separate factors such as overtime still apply). Nonetheless, working hours should not exceed 52 hours per week.

Paid leave
Currently, employees are entitled to at least one day of paid leave per month, plus one day of leave for every year of employment after the first year and 10 days' leave for work without absence during a full year, or eight days of leave for at least 90% attendance during the year.

There is no minimum monthly paid leave under the new provisions. Minimum annual paid leave will be as follows:

• 15 days for employees who have worked a full year with at least 80% attendance;
• one day per full month of employment with 100% attendance for employees who have been employed for less than a year; and
• an additional day for every two years of employment after the first year (provided that total annual paid leave does not exceed 25 days) for employees with more than three years of employment.

Menstrual leave of one day per month, which is currently paid, will be unpaid under the new provisions.

Unused leave
Currently, if an employee does not use all of his or her paid leave during the year, the unused days may be relinquished. However, wages may be paid in lieu of unused leave at the end of the year.

The new provisions clarify that the employer need not compensate for any paid leave that is unused by the employee.

Compensatory leave
Currently, an additional 50% of wages must be paid for overtime, night work (ie, work between 10pm and 6am) and holiday work. These factors are cumulative (eg, night work in holiday time warrants an additional 100% of usual wages). The new provisions retain this as a default rule, except that a rate of 25% rather than 50% applies for the first four hours of overtime a week during a three-year transition period. However, the amendments also permit compensatory leave for overtime, night work and holiday work, for which the employer may agree with employees to grant paid leave in lieu of the extra wages.

Maintenance of pay
Generally, employers will be required to maintain current wage levels and hourly wages notwithstanding the amended provisions of the act. However, the amendments give no further clarification or guidelines for implementing the rule.

The amended act will apply automatically to the public and financial sectors as of July 2004 and to employers with 1,000 employees as mentioned above, and to other workplaces based on the number of employees as follows:

• as of July 2005 for workplaces with more than 300 employees;
• as of July 2006 for workplaces with more than 100 employees;
• as of July 2007 for workplaces with more than 50 employees;
• as of July 2008 for workplaces with more than 20 employees; and
• sometime before 2011 for workplaces with less than 20 employees.

Internal employment regulations and collective bargaining agreements must be amended to conform with the new provisions. With regard to the number of employees, the term 'workplace' has yet to be defined appropriately. For example, it is possible that a single office or other site where employees are grouped may constitute a separate workplace if those employees enter into a collective bargaining agreement separately from other colleagues.

An employer may opt to observe the amended act ahead of its implementation, in which case the majority of employees (or of the union, if there is one representing the majority of employees) must give their consent. In addition, the Ministry of Labour must be notified.

While the implementation schedule for the reforms extends over several years, their early application to the public and financial sectors and among larger employers is likely to accelerate their widespread adoption. Nevertheless, the new legislation raises certain questions. While the amended act purports to require that current wage levels be maintained, it does not clarify how such a requirement is to be complied with, nor does it specify the consequences of failure to comply. The Ministry of Labour has stated that it will issue guidelines on this matter, but it has yet to do so. These and other transition rules will need to be clarified in due course.

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.