First, multiple unions will be allowed in a single workplace from July 2011.

Second, wage payment of full-time union officials will be banned from July 2010. Instead of wages, union officials should be given paid time-off . . . → Read More: Multiple unions in a single company to be allowed from July 2011]]> Based on the recent amendment of Trade Union and Labor Relations Adjustment Act, two dratic changes will happen to labor relations environment.

First, multiple unions will be allowed in a single workplace from July 2011.

Second, wage payment of full-time union officials will be banned from July 2010. Instead of wages, union officials should be given paid time-off for their union activities.

You can get more details of the new system from this short paper.

It is very difficult to find information on this question. The following is information I gathered by reading laws, browsing related organizations and doing web searches.

1. National Pension

National pension is mandatory to . . . → Read More: Korean social insurance system for expatriate employees]]> I already covered social insurance systems for Korean employees in my previous post. But what about social insurance for staff sent from headquarters to Korea?

It is very difficult to find information on this question. The following is information I gathered by reading laws, browsing related organizations and doing web searches.

1. National Pension

National pension is mandatory to foreign workers who are aged 18 to 59 and working in a company located in Korea with 1 employee or more.

The exception is when national pension of the foreign country does not apply to Korean workers working there. In this case, Korean National Pension is not mandatory for the concerned foreign worker (rule of reciprocity).

Currently, Korea has social security agreements with 15 countries such as Canada, United Kingdom, United States, Germany, China, Netherlands, Japan, Italy, Uzbekistan, Mongolia, Hungary, France, Australia, Czech, and Ireland.

The agreement affects application of the National Pension for foreigners.

For more information on social security agreements with individual countries, check the English page of the National Pension Service.

2. Industrial accident compensation insurance

Industrial accident compensation insurance is basically applied to foreign employees hired by a company in Korea.

As for the exemption, the same principle of reciprocity as the national pension prevails here.

3. Employment Insurance

Basically, foreign workers are excluded from the application of employment insurance.

- Optional -

However, for those who have E-7 and following visas, employment insurance is optional. They may subscribe to the insurance  or not. The same principle applies to holders of the following visas: C4, E-1, E-2 ~ E7, H-2.

For details of Korean visa types, visit E-Government for Foreigners website and read “Visa Issuance Guide – status of stay”.

- Reciprocity -

Foreign employees with following visas should follow the rule of reciprocity.

D-7: Supervisory intra-company transfer
D-8: Corporate Investment
D-9: Trade Management

4. Health Insurance

Health insurance is mandatory for workplace with one or more employees. However, a foreign employee with one of the following conditions can be exempted from Korean health insurance by submitting a paper and relevant documents to National Health Insurance Corporation.

The concerned employee’s health coverage is guaranteed by:
- his/her own country’s law
- his/her own country’s foreign insurance
- his/her contract with an employer

P.S. : Searching for relevent English – even Korean language – information on social insurances  for foreigners is a frustrating experience. Not a single government agency provides practical information on this issue on their English websites.

Hence, the contents above may not be correct 100 percent. Should you, as an expatriate manager or an expert in Korea, find any mistakes, please let me know.  I will correct it.

40 hours workweek and related  work conditions in the LSA will apply to those companies before the end of . . . → Read More: 40 and 44 hours workweeks – application schedule and differences]]> Since revision of the Labor Standards Act (LSA), 40 hours workweek system has been adopted by most companies in Korea. The only segment left uncovered by the system at this time is companies with less than 20 employees.

40 hours workweek and related  work conditions in the LSA will apply to those companies before the end of 2011. The specific date has yet to be decided by the presidential decree. (Addendum of the LSA)

The problem is most foreign companies in Korea usually starts with employees fewer than 20. This means that those companies are basically under the 44 working hours system under the labor standards act before 2003 revision.

Although, most of starting foreign companies I have seen for the past few years seem to adopt the new 40 working hours system regardless of their size, it won’t hurt them to know what the differences are between the old and new systems.

So here they are.

Incidentally, the Labor Standards Act of Korea does not have an explicit regulation on . . . → Read More: Probationary period]]> The probationary period, here, means a period that a company, after concluding a labor contract with a worker, sets a certain period of time to assess the worker’s aptitude for his job, train him to get familiar with the job, and etc.

Incidentally, the Labor Standards Act of Korea does not have an explicit regulation on this matter. 

The only article that mentions a probationary worker is the article 35 of the act.

Article 35 of the LSA

In the event of dismissal of an employee with any of the following status of employment, the employer is not obliged to give a 30-day notice.

- Daily employees who have not worked for a 3 consecutive months
- Employees hired for a pre-arranged period of time lasting 2 months or less
- Salary employees who have worked for less than 6 months
- Employees hired for seasonal work for a pre-arranged period of time lasting 6 months or less
- Employees under probationary period (of 3 months or less)

Most companies in Korea, based on this article, regulates in their rules of employment or individual labor contracts that probationary period shall be 3 months. 

1. What about making the period longer than 3 months? 

Again, no relevant article in labor law. 

However, an administrative interpretation by the Ministry of Labor says that the length of a probationary period is not restricted to 3 months but can be longer than 3 months  on the basis of nature of jobs and within reasonable bound. (February 9, 1993/Geungi 01254-221)

The interpretation also advises companies to have a relevant article in the collective bargaining agreement or the rules of employment. 

2. What about renewing or extending the probationary period? 

As can be expected, there is no mention on this matter in the law. Just an administrative interpretation by the ministry that extending the probationary period is not against law. (October 10, 1991 / Geungi 01254-14914) 

The conclusion is that an employer can decide on the length of probationary period as long as he/she considers it necessary for the purpose of assessing and training the worker but within the limit as can be reasonable and that such period should be stipulated in labor contracts, rules of employment to prevent any debate between a worker and a company. 

Mandatory subjects

If a labor union asks management . . . → Read More: Subjects for collective bargaining]]> Korean labor law, more specifically “trade union and labor relations adjustment act (TULRAA)”, does not provide a detailed list of what can be submitted as subjects for collective bargaining. However, classification of bargaining subjects into three categories – mandatory, permissible, and illegal – can be made based on court precedents.

Mandatory subjects

If a labor union asks management to have collective bargaining on mandatory subjects, management cannot refuse to have bargaining without a justifiable cause. Refusal without such cause becomes unfair labor practice.

If CB on mandatory subjects reaches an impasse, the union can also request the Labor Relations Commission to provide mediation, and conduct strike after the mediation process is over.

In general, mandatory subjects are related to working conditions such as wage, working hours, holidays, leaves, workers’ compensation, and safety and health.

Permissible subjects

If a union request CB on permissible subjects, management can refuse to have the bargaining. Such refusal does not constitute unfair labor practice. Even if a negotiation comes to a deadlock, the union cannot resort to mediation process nor strike. Of course, management can choose to have CB on permissible subjects if it wants to.

Usually, subjects related to labor-management relations such as union activities, prior deduction of union dues, and full-time union officials fall under the category of permissible subjects.

Illegal (prohibited) subjects

Having collective bargaining or signing a collective bargaining agreement on illegal subjects are legally prohibited. Agreement on such subjects is ineffective.

The illegal subjects are, for examples, release of a criminally charged and detained worker, abolishment of legal retirement pay system, subsidy to a labor union, and subjects that infringe upon essential parts of management’s right to business and personnel management.

Employer’s rights to business management and personnel management and bargaining subjects

Business management rights refer to employer’s right related to hiring, relocation, performance appraisal, promotion and disciplinary actions. Business management rights include reorganization, business expansion, appointment of senior executives, M&A, business transfer, introduction of new production technologies or machines, and decision on production plan.

This is one gray area where disputes arise often between labor and management. Positions held by courts on this matter can be summed up as..

Rights to business management and personnel management are recognized as employer’s right to exercise their property rights that are protected by the Constitution. Therefore, decision making per se with regard to business management or personnel management is not mandatory subject for collective bargaining.

However, an issue of business management or personnel management can become subject for collective bargaining if it is closely related to working conditions of workers. CB on such issue should be carried out to the extent that the negotiation does not infringe upon essential parts of the employers’ right to business management or personnel management.

However, it is bound to happen in any workplace that is seeing an increase in volume of business and corresponding increase in number of employees. . . . → Read More: Setting up a labor union in Korea]]> For most, or maybe all, of top management in any country, a news that their employees started to set up a labor union in the workplace may not be an welcome news.

However, it is bound to happen in any workplace that is seeing an increase in volume of business and corresponding increase in number of employees.

This post is about a very basic information on labor union establishment in Korea based on Korean labor laws.

First, about the number of workers required to set up a labor union. Simply saying, it takes two persons to set up a labor union in Korea. Setting aside all other conditions, the small number of people required to set up a labor union seems to be a factor that encourages workers to easily resort to the creation of a labor union to solve any workplace problems they have in Korea. Other countries seem to require more persons than TWO for establishment of a union. For example, if I remember correctly, Australia requires 50 workers to set up a union. (Correct me, If I am wrong  

Second,  who is allowed by law to join a labor union? Definitely, not an employer. But not just an employer. Those who represent interests of an employer are also not allowed by law to join a union. For example, high-level managers, team chiefs, and especially managers or staff who work in the personnel department. However, there is no clear-cut divide on this matter. I often see a company where even team chiefs are members of its union. This is often the case with companies where balance of power between labor and management is broken or where managment did not pay sufficient attention and care to set things right.

Third, actual procedures of formally establishing a union. Korean labor law adopts an approach of registration-based establishment of a labor union. This means any labor union can be set up simply by submitting required papers such as union bylaws to the ministry of labor. No validation or voting procedures as in the United States.

Of course, the mere fact of union establishment is not a serious issue. What comes next, collective bargaining or strike, will be a real challenge for management. But that will need another post.

My online search was not successful due to lack of English contents on labor issues. However, in the course of doing the research, I came across an interesting report released . . . → Read More: Korea’s record in terms of enforcing contracts and employing workers]]> A colleague of mine asked me a few days ago to find a document showing Korea’s level of transparency in terms of legal procedures of unfair dismissal disputes. 

My online search was not successful due to lack of English contents on labor issues. However, in the course of doing the research, I came across an interesting report released by the World Bank named “Doing business in Korea”.

The report had several indicators related to the ease of doing business. What caught my attention was the indicator “Enforcing contracts”.  The indicator is about procedures, time and cost to resolve a commercial dispute.

Although the indicator is not 100% relevant to dismissal dispute procedures, I thought it might be something of slight reference.

The ranking of countries based on the “enforcing contracts” indicator as shown below was somewhat surprising to me.

Korea better than Singapore and Japan in terms of time and cost for commercial dispute resolution? Maybe what I read and heard from HR managers of foreign companies about slow and inefficient legal systems of Korea only applies to labor-related disputes.

What confirmed my guess was the indicator “employing workers”. The indicator turned out to be not only about hiring but also relates to difficulty of firing and firing cost. On this indicator, Korea ranked 152 among 181 countries.

If you’re interested in the above rankings and more, check here.

1. When do I have to subscribe to the insurances for Korean workers?

You should subscribe to the insurances when you hire . . . → Read More: On social insurances – for a start-up foreign company in Korea]]> Many foreign employers who newly start their business in Korea ask about social insurances scheme (employment insurance, industrial accident compensation insurance, national pension, and health insurance) in Korea. I provide here the most basic information on this subject.

1. When do I have to subscribe to the insurances for Korean workers?

You should subscribe to the insurances when you hire one or more full-time Korean employee. Each of the insurance is mandatory and managed by government agencies.

2. Are there certain categories of workers who are exempt from mandatory subscription to the insurances?

Yes.  For each insurance scheme, there are exempted workers as follows.

Employment Insurance & Industrial Accident Compensation Insurance

A part-time worker whose monthly working hours is less than 60 hours (including a part-time worker whose weekly working hours is less than 15 hours)

National Pension & Health Insurance

A part-time worker whose monthly working hours is less than 80 hours

3. Which agency do I contact for the insurances?

Here are links to English websites of each agency.

National Pension

Health Insurance

Employment Insurance & Industrial Accident Compensation Insurance (the agency has not much informaltion on employment insurance in the English website but it also manages the insurance)

Incidentally, these websites are only good as a simple information source. Don’t expect them to give foreign employers detailed procedures on taking care of insurances on their own.

4. How much do I pay as an insurance premium? 

According to the recent survey by the Mininstry of Labor for 3,339 companies with 10 or more employees, the insurance premium took up 6.7% of per capita labor cost in the year 2007. 

The folloiwng figures are based on the government notice for the year 2008.

Health Insurance

- 5.08% of monthly wage (premium is paid on a monthly basis)
- 2.54% borne by the employer, 2.54% borne by the worker

National Pension

- 9% of monthly wage (premium is paid on a monthly basis)
- 4.5% borne by the employer, 4.5% borne by the worker

Industrial Accident Compensation Insurance

The premium is paid once a year. The premium rate differs for each industry based on accident rates. It ranges from 553/1,000 of total wage in mining industry to 7/1000 in finance industry.

Employment Insurance

The premium is paid once a year.  It has two components, namely unemployment benefit and vocational ability development.

(unemployment benefit)

The premium for unemployment benefit is 0.9% of total wage (0.45% respectively borne by an employer and a worker)

(vocational ability development)

The premium for vocational ability development, to be paid by the employer alone, ranges from 0.25% (a company with less than 150 workers) to 0.85% (a company with 1,000 or more workers).