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.

When do companies disclose the salary? Most companies do that “when a labor contract is concluded after the applicant is finally accepted’ (38.6%).  Some do that at a final interview (30.3%) or at a first interview (29.2% ).

If so, how much is the salary of those companies?

The survey showed that companies not disclosing the salary information paid annual salary of  21,980,000 KRW (16,289 USD) to colleage graduates whereas those that disclose the information paid 22,500,000 KRW(16,675 USD), resulting in the gap of 520,000 KRW (385 USD).

Meanwhile, a survey of 988 job seekers conducted by the same job portal website showed that 79.7% of respondents said that the level of annual salary is what they want to know above anything else.  Other answers were type of employment  (66.2%), welfare (52.3%), commute hour’(28.0%), number of persons to be recruited (15.6%), sales (15.6%), and number of exectutives (9.4%) [multiple answers were allowed]

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 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 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 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.

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 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 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).

Concept of the discrimination redress system

The discrimination redress system was newly introduced under the Act on Protection of Fixed-term and Part-time Employees (hereinafter referred to as ‘fixed-term employees act’) and the Act on Protection of Dispatched Workers (hereinafter referred to as ‘dispatched workers act’).

The system prohibits employers from treating non-regular workers (a worker with a fixed-term contract, a part-time worker and a dispatched workers) disadvantageously compared to regular workers (a permanent worker, a full-time worker and a directly hired worker) over wage and other working conditions without a rational reason. The system also includes a redress procedure for discriminatory treatment involving the Labor Relations Commission.

The system does not compel an employer to equally treat regular and non-regular workers in terms of all conditions of work, but only bans a disadvantageous treatment with no rational reason. In other words, a differential treatment for non-regular workers is permitted when there is a rational reason such as differences in productivity and skills.

Redress procedure only applicable to discrimination after the enforcement of laws

A worker should request a redress of discriminatory treatment only for a treatment that happened after the enforcement of the laws for his workplace. The laws do not retroactively apply to discrimination that took place before the enforcement of the laws.

Enforcement schedule of the redress system

Business or workplaces with 300 workers or more/ the state or local government agencies (public sector): July 1,2007
Businesses or workplaces with 100 to 299 workers: July 1, 2008
Businesses or workplaces with less than 100 workers: July 1, 2009
Businesses or workplaces with less than 5 workers: Exempt

How to calculate the number of employees for the enforcement schedule

For the calculation of the number of employees for the above schedule, all workers that are directly hired by a company including regular, daily-hire, part-time, fixed-term, and foreign workers should be included but workers that are not directly hired by a company such as in-house subcontract workers and dispatched workers be excluded.

Discrimination redress system for fixed-term and part-time workers

Who can apply for redress of discrimination?

To apply for the redress, he/she should be (1) a worker under the labor standards act and (2) a fixed-term or a part-time worker.

Who is banned from making discriminatory treatment?

A person who is banned from giving discriminatory treatment is an employer.

Although the act uses the same term “employer”, a distinction should be made between an “employer” who should not give discriminatory treatment and an “employer” who is a party involved in the redress procedure and has a duty to comply with a redress order.

An employer in the first category means an “employer under the labor standards act”, that is, a business owner or a person responsible for management of a business or a person who works on behalf of a business owner with respect to matters relating to workers.

Therefore, those who should not give discriminatory treatment are not only a business owner who hired a fixed-term or part-time worker but also persons who were given responsibility and authority by a business owner to determine working conditions such as wage and hours of work or to command or supervise workers for the interest of a business owner. In addition to a business owner, a chief of a sale office, a branch chief, a factory chief and a person in charge of personnel management may fall under this category of employer.

An employer in the second category is restricted to a business owner or a legal person depending upon the nature of a company.

Wage and other working conditions for which discrimination is prohibited

The scope of ‘wage and other working conditions’ comprises (1) working conditions regulated by the Labor Standards Act and (2) working conditions determined by collective bargaining agreement, rules of employment, and labor contract. These include wage, working hours, holidays, leaves, safety and health, and industrial accident compensation. If a certain matter is not included in collective bargaining agreement, rules of employment, and labor contract as a working condition, it cannot be considered as ‘wage and other working conditions’ for which discrimination is prohibited. Consequently, application for discrimination redress cannot be made for such matter.

Comparison with regular workers

To determine whether a discrimination was made against a fixed-term or part-time workers, there should be regular workers available for comparison.

Workers to compare with a fixed-term worker are those who are engaged in the same or similar jobs under a labor contract without a fixed term in the business or workplace concerned. Workers to compare with a part-time worker are full-time workers that are engaged in the same or similar jobs in the business or workplace concerned.

Disadvantageous treatment

‘Disadvantageous treatment’ means that a fixed-term or part-time worker is getting unfavorable treatment in terms of wage and working conditions compared to regular workers.

In determining whether there was disadvantageous treatment, , it is a principle to judge on the basis of comparison of detailed items of wage and working conditions of regular workers with corresponding items of those for a fixed-term or part-time worker.

Rational reason

Disadvantageous treatment and discriminatory treatment are distinct. If an employer has a rational reason in treating a fixed-term or part-time worker in a disadvantageous manner compared to regular workers, such disadvantageous treatment is justified and does not constitute discriminatory treatment. In other words, discriminatory treatment is disadvantageous treatment without a rational reason.

Procedure of discrimination redress

Application for a redress of discriminatory treatment should be made within three months from the day when the discriminatory treatment occurred. When the three months elapse, a worker’s right to apply for redress expires and therefore application made after the three months is dismissed.

Investigation, inquiry, and the burden of proof

Upon receiving the redress application, the Regional Labor Relations Commission conducts necessary investigation and inquiry into related parties without delay.

As the burden of proof falls on employers with regard to disputes relating to discriminatory treatment, he/she should prove one the following points.

- A worker cannot apply for the redress as he is not a non-regular worker.
- There are no regular worker for comparison or selection of workers for comparison was wrong.
- There was no disadvantageous treatment.
- Disadvantageous treatment had a rational reason.

Mediation and Arbitration

The Regional Labor Relations Commission can commence mediation procedures at the request of both or either of the parties concerned or by virtue of its authority during the inquiry. If the related parties file for arbitration as a result of their agreement to follow an arbitration decision taken by the Labor Relations Commission, the Commission can conduct arbitration.

The medication or arbitration should be filed within 14 days of the date on which an application was made to redress discriminatory treatments.

The mediation or arbitration decision has the same effect as conciliation reached in the courts in accordance with the Civil Procedure Act.

Decision

The Labor Relations Commission, if it judges that the treatments in question are discriminatory after ending the investigation and inquiry, issues a redress order to the employer. If it judges that the treatments in questions are not discriminatory, it makes a decision to dismiss the application for a redress.

The contents of the mediation or arbitration or of the redress order may include ‘suspending discriminatory actions, improving working conditions, such as wages, and making adequate monetary compensation’.

Objection to redress order

If a party challenges a redress order or dismissal decision by the Regional Labor Relations Commission, the party may apply for review to the Central Labor Relations Commission within 10 days of receiving the notice of the redress order or dismissal decision.

If a party objects to a review decision made by the Central Labor Relations Commission, the party may bring an administrative lawsuit against the decision within 15 days of receiving the notice of the review decision.

Measures to enforce a redress order

The minister of labor can impose by a fine for negligence not exceeding 100 million won to a person who fails to comply with the final redress order confirmed without any justifiable reason.

The Minister of Labor also can require employers to submit a status report on compliance with the confirmed redress order. A fine for negligence not exceeding five million won is imposed upon a person who fails to comply with the demand of the Minister of Labor to submit a status report without any justifiable reason.