Korean labor law for Foreign Employers

Information on employment laws of Korea

Contact me for questions on Korean labor law

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A manager of foreign companies can ask questions on Korean labor laws by clicking here.

Written by Sunny Lee

April 6th, 2013 at 11:56 am

Substitute holiday system of Korea

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Unlike other advanced countries such as United States, Japan and Australia, Korea never had substitute holidays system. That means when a public holiday overlaps with Sunday, the holiday was just lost for employees.

This changed with the passage of a bill for substitution of overlapping holidays at the National Assembly in 2013.  “A Regulation on Closure Days for Public Offices” was amended accordingly based on the bill.

The substitute holiday system in the regulation stipulates that the substitution is not for all overlapping holidays but only for Lunar New Year’s Day (Dec.31, Jan. 1 and 2 of the lunar calendar), Korean Thanksgiving Day (August 14, 15 and 16 of the lunar calendar), and May 5 (Children’s Day). As a result, in 2014, there was only one case of substitution, which was taking a day off on September 10 instead of September 7 (Thanksgiving day) that fell on Sunday.

The regulation stipulates that overlapping of Lunar New Year’s Day (three days) and Korean Thanksgiving Day (three days) with Sunday or other public holidays shall make next working day after the successive holidays as a substituted holiday. As for Children’s day, overlapping of the day with Saturday, Sunday, or other public holidays shall make the next working day after May 5 as a substituted holiday.

There is one thing to remember about the relationship between the above-mentioned regulation and actual holidays at private enterprises.  According to the labor-related laws, there are only two types of legal holidays that employers should allow to employees. They are paid weekly holidays (usually Sunday) and Workers’ Day (May 1). Public holidays in the regulation are not mandatory holidays for employees. It up to an employer to make those public holidays days off for his employee by inserting a relevant article in the rules of employment or in the collective bargaining agreement.

For example, an employer may stipulate holidays like this in the rules of employment.

<Holidays>
1. weekly paid holidays
2. worker’s day
3. holidays based on the Regulation on Closure Days for Public Offices

In this case, the substitution system will also apply to the workplace.

On the other hand, an employer may just enumerate holidays without mentioning the regulation.

<Holidays>
1. Weekly paid holidays
2. Worker’s day
3. Lunar new years’ days
4. Korean Thanksgiving Day
..
.. and so on.

In this case, the substitution system does not apply to the company.

In closing, here is a list of holidays based on the Regulation on Closure Days for Public Offices for 2015.

1.  Jan.1 (New year’s day)
2. Feb. 18 to 20 (Lunar new years days)
3. March 1st. (Independence movement day)
4. May 5 (Children’s day)
5. May 25 (Buddha’s birthday)
6. June 6 (Memorial day)
7. Aug 15 (Independence day)
8. Sept 26 – 29 (Thanksgiving days: Sept 27 overlaps with Sunday hence a substitute holiday on Sept 29)
9. Oct 3 (National foundation day)
10. Oct 9 (Korean Alphabet day)
11. Dec. 25 (Christmas day)

** The year 2015 has only one substitute holiday on September 29.

 

Written by Sunny Lee

October 14th, 2014 at 5:18 pm

Retirement Pension to be mandatory for all companies in Korea in 2022

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On 27 August 2014, the Korean government announced a plan to make retirement pension system mandatory for all companies. The followings are main points of the plan.

1. The schedule of mandatory adoption

2016: companies with 300 or more workers
2017: companies with 100 or more
2018: companies with 30 or more
2019: companies with 10 or more
2022: all companies

2. Financial support for small-and-medium companies by introducing the retirement pension fund system for SMEs

– to be implemented in July 2015
– financial support for the pension in SMEs (companies with 30 workers or less)
– subsidy from the fund to pay half of the pension operation fees paid by an employer (the fee is 0.4% of the contribution)
– subsidy from the fund to pay 10% of the contribution by an employer for a worker with monthly salary of 1.4 million won or less

3. Temporary workers with working period of less than 1 year to be covered by retirement pay

– to be implemented in 2016
– workers with a labor contract for less than 1 year will be entitled to retirement pay which is currently only for workers with 1 year or longer service

Of course, these are just a plan at this moment and actual amendments of related laws would have to follow for them to materialize.

Written by Sunny Lee

August 28th, 2014 at 5:04 pm

Posted in labor news

What is the Maximum Overtime Hours allowed in Korea?

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What is the maximum work hours including overtime that you can implement in your workplace in Korea? The answer is currently 68 hours and it is likely to change sooner or later.

Now, here is the explanation on how we get 68 hours.

Legal weekly work hours based on the Labor Standards Act (LSA) is 40 hours.

Article 50 of the LSA – (1) Working hours per week shall not exceed forty hours excluding recess hours.

The maximum overtime hours allowed by the law is 12 hours per week.

Article 53 of the LSA – (1) If the parties concerned reach agreement, the working hours stipulated in Article 50 may be extended up to twelve hours per week.

It would appear that the maximum weekly work hours based on the above mentioned articles should be 52 hours per week. However, the LSA has no specific article about whether work hours on Saturday and Sunday should be included in the maximum overtime of 12 hours stated above or not. What we currently have is only the guideline by the Ministry of Employment and Labor that says work hours on Saturday and Sunday are not included in the maximum 12 hours overtime.

That leads to the following calculation.

40 hours (workweek) + 12 hours (max. overtime) + 8 hours (Saturday) + 8 hours (Sunday) = 68 hours

*You should, of course, pay premium rates for overtime and holiday work.

This 68 hours has been the practice in businesses for a long time. However, a number of lawsuits lodged by labor unions claiming that 52 hours, not 68 hours, should be the maximum based on the strict interpretation of the law led to debates among labor, management and the government. Moreover, reduction of overtime hours to improve worker’s quality of life has been one of the agenda pushed by the new government.

Labor, management and government have been discussing how to settle the issue of overtime limit for several months, but have yet to reach a conclusion. The government and the ruling party is pushing for 60 hours as maximum work hour and labor unions and opposition parties are for 52 hours. Eventually, the law will be amended and more specific and detailed restriction on overtime will be enforced but it is hard to say when an agreement will be made because discussions over labor-related issues in Korea have a proven record of getting postponed or protracted forever.

There was an interesting coincidence. While I was preparing a post on this topic, I got a question on the same subject from someone who used the question form on the top of this blog. Thanks to him, I was able to write this post faster than usual. :-)

Written by Sunny Lee

April 23rd, 2014 at 12:06 pm

Childcare Leave System in South Korea

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This post covers five important points on childcare leave based on the Equal Employment Act of Korea that governs the leave.

1.Who can request childcare leave?

An employee, male or female, who has a child aged not more than 8 years or a child in the 2nd or lower grade of an elementary school. Not only regular workers but also fixed-term workers and dispatched (leased) workers can request childcare leave. For fixed-term and dispatched workers, the term (duration) of their contract is suspended during the leave.

2. Who is not eligible for childcare leave?

– An employee whose consecutive period of service will be less than 1 year on the day prior to the day on which the childcare leave is supposed to begin.
– An employee whose spouse is on a childcare leave for the same child.

3. What is the maximum period of childcare leave?

Childcare leave can last up to 1 year.

4. Should an employer pay salary to an employee during his/her childcare leave?

An employer does not have a legal obligation to pay employees during their childcare leave unless company rules state otherwise. Employee themselves should request childcare leave benefits at the employment centers under the Ministry of Labor. The benefits are 40% of monthly ordinary wages.

5. What are other steps that an employer should ensure with regard to childcare leave?

The employer should reinstate an employee after childcare leave to his/her previous position or other position with the same level of salary. The employer should include the period of childcare leave in the period of service to calculate retirement pay, promotion and annual leave. Also, the employer should not dismiss or give disadvantageous treatment to workers because of childcare leave. An employer cannot dismiss workers during their childcare leave.

Written by Sunny Lee

April 18th, 2014 at 4:16 pm

Mandatory Retirement Benefits for employees under Korean labor law

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This post is a brief explanation of mandatory severance benefits that are required by Korean labor law.

Employee Retirement Benefit Security Act stipulates mandatory severance packages for employees who leave a company after at least one year of service.

The misuse of the word ‘retirement’ in the law confuses foreign managers. I think “severance benefits” is more appropriate term. The definition of retirement in Wikipedia is: “Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours. Many people choose to retire when they are eligible for private or public pension benefits.”

Retirement Benefits under the act is not only for retirees who are at the closing stage of their professional life. Regardless of whether an employee is going into retirement or not, he is entitled to the benefits upon termination of the employment relations as long as he worked for a company more than 1 year.  Every kind of termination is covered by the law. An employee may resign, may be laid off, or even be fired for making serious mistakes that brought damage to the company. For example, for the last situation, the employer should pay him retirement pay and try to claim damages through a lawsuit.  In a nutshell,  an employee is entitled to retirement benefits described in the law for all kind of termination. 

Retirement pay to be paid to a worker is average wage of 30 days for 1 year. If a worker leaves the company after 1 year and several months, retirement pay for those additional months should be calculated on a pro rata basis.

If an employer established a company and makes no decision about mandatory retirement package, retirement pay system is automatically adopted. Some Koreans use the word “severance pay”, which means the same thing as retirement pay.

Under the Employee Retirement Benefit Security Act, labor and management can choose retirement pension system instead of retirement pay. An employer should obtain an agreement of a majority union or majority of workers (if there is no majority union) to decide on retirement benefit system. They may choose retirement pay or retirement pension.

Retirement pension has two types. One is defined contribution (DC) and another is defined benefit (DB).

Under the DC program, an employer contributes predetermined money, which is 1/12 of the annual total wage of workers to the individual accounts of workers at the financial institutions chosen as pension providers by labor and management. It is up to workers to manage the fund based on advice by the financial institutions. Upon termination of the employment relations, the financial institution pays pension as annuity or lump-sum to workers.

Under the DB program, the amount of pension benefit payable to the workers is predetermined. The contribution to be made by the employer vary depending on the outcome of the fund management which is the responsibility of financial institution. The amount of pension benefit under the DB program is the same as retirement pay, which is average wage of 30 days for one year of service.

Written by Sunny Lee

April 14th, 2014 at 4:24 pm