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.

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.

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).

Demonstration against the import of American beef that is feared by the public as likely to cause Mad Cow disesase and incessant coverage by newspapers and broadcasting over the issue moved . . . → Read More: Korean labor unions getting realistic?]]> Almost every year, early summer in Korea has been a season of strikes and rallies by labor unions. So far, it seems like a different one this year. 

Demonstration against the import of American beef that is feared by the public as likely to cause Mad Cow disesase and incessant coverage by newspapers and broadcasting over the issue moved the presence of labor unions against so-called “business-friendly” labor policies of the government out of public attention.

While the upper-level unions, especially the Korean confederation of Trade Unions, are still sticking to confrontational approaches to labor relations, the individual labor unions of companies look moving to more realistic direction.

The moves illustrating such change of direction include wage concession, strike-free declaration, and letting employers to decide on wage increase or even accepting wage freeze.

Along with a statistical trend of decreasing strikes and working days lost, these actions of labor unions may be a sign of the future when Korean labor relations will be as mature as those of advanced countries.

Yesterday’s article from Dong-A ilbo covers details of these changes.

Some of the controversies over the foreign company’s strike was whether branch managers who have higher status than frontline staff can join . . . → Read More: Can branch managers join a labor union?]]> More than 100 days have passed since the strike at Allianz Life Insurance started. Last week, management of the company fired 87 branch managers for participating in illegal strike when they are supposed to side with management as senior managers.

Some of the controversies over the foreign company’s strike was whether branch managers who have higher status than frontline staff can join a labor union and whether the labor union with such managers as members is still a lawful union.

1. Can branch managers join a labor union?

Laws relevant to this issue can be found in the following text of the Trade Union and Labor Relations Adjustment Act (TULRAA) of Korea.

Article 2 (Definitions)
For the purpose of this Act, the definitions of terms shall be as follows: 

2. The term “employer” means a business owner, a person responsible for the management of a business or a person who acts on behalf of a business owner with regard to matters concerning workers in the business;

4. ….. an organization shall not be regarded as a trade union in the cases falling in any of the following categories:
(a)In case where an employer or other persons who always act in the interest of the employer are allowed to join it.

The problem with this definition of a person who is deemed as an employer and as such should not join a union is that it is vague enough to create confusion.

The Ministry of Labor does provide an example of ”a person responsible for the management of a business” such as chiefs of factories, departments, branches, and offices. However, as shown in the case of Allianz, the persons concerned can always say that they are not “responsible for the management of a business” but only following directions of top management, regardless of the truth of such statement.

When compared to the text of the National Labor Relations Act of the United States, the vagueness of the TULRAA is more visible.  According to the American act, a category of workers called supervisors cannot join a labor union and they are;

“Any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment. (29 USC 152 (11))”

Actually, rulings made by Korean courts over eligibility of the so-called “employers”  for union membership have similar wordings as the text of the NLRA. But it would be much better for labor and management if there is a clear divide in written law over who can sit on which side of the bargaining table.. or maybe I am wrong. Labor unions may not want to see some of their potential members labelled away as employers.

2. Can a union with  ”employers as defined by the TULRAA” as members still be lawful?

The answer to the question is two-fold. Legally “NO”, actually “Quite possible”.

An often quoted court ruling over the question say that even if there are “employers” (e.g. senior executives, factory chiefs, branch managers) among union members, the union in question does not automatically lose its legitimacy as long as inclusion of such persons does not undermine independence of the union.

What the court ruling means is that, unless there is a hard evidence for independence of a union undermined by the presence of “employers” within the union, there is always a possibility for a labor union that has executives, directors, managers as union members.

So what should an employer do about this, if he/she has a such problem in one’s company?

If a labor union is still at the infancy stage, the best would be to check upon the union bylaw, and ask the labor ministry to order the union to correct the eligibility conditions so that any workers that fall under the “employer” category should be removed.

If a labor union has been around for a while, and if there is a conflict between labor and management over the presence of “employers” in the union?  This is what happened in Allianz Korea, and I guess they must have consulted some of the best legal brains in Korea to come up with a good way to handle the issue.

What did they do? They ordered the managers to withdraw from the union citing their status. When managers refused to do so, managment escalated the level of discipline step by step, and finally fired them.

Of course, I am not saying that the solution is good for the whole situation. We never know what the massive dismissal may trigger in the future.  

The following are the basic requirements for dismissal based on the labor standards act (LSA) of Korea.

1.  An employer should have a justifiable reason to dismiss a worker.

. . . → Read More: Basic legal requirements for dismissal in Korea]]>

Dismissal is one of the inevitable elements of human resource management. An employer can lessen a possible adverse impact of dismissal by complying with legal requirements dismissal.

The following are the basic requirements for dismissal based on the labor standards act (LSA) of Korea.

1.  An employer should have a justifiable reason to dismiss a worker.

Dismissal without a justifiable reason is invalid in Korea. However, the LSA does not give a definition of a “justifiable reason”.

The definition has been established by court rulings. The definition reads that a justifiable reason is one that makes it impossible for an employer to maintain employment relationship.

It sounds somewhat vague as it is a definition abstracted from numerous previous court rulings. The following list shows some specific reasons for dismissal that have been recognized by courts.

• Failure to follow instructions on job or personnel management
• Unauthorized leave of absence
• Early-leaving without approval, negligence
• Poor performance at work
• Physical or verbal violence at work
• Criminal offences outside workplace
• Obstruction of business, violation of the company rules
• Causing financial damages to the company
• Undermining the company’s reputation
• Violating work rules and safety rules
• Forging educational or professional attainment

2. Even if there is a justifiable reason for dismissal, an employer cannot fire a worker for some periods stipulated by by the LSA.

The periods are;

• temporary interruption of work for medical treatment of an occupational injury or disease and 30 days thereafter
• maternity leave and 30 days thereafter

3. An employer should give an advance notice to a worker 30 days before dismissal.

If an employer fails to give such notice, he/she should give a worker ordinary wage for 30 days instead.

The LSA states that an employer does not have to give advance notice to the following categories of workers.

• one who has been employed on a daily basis for less than three consecutive months
• one who has been employed for a fixed period not exceeding two months
• one  who has been employed as a monthly-paid worker for less than six months
• one who has been employed for seasonal work for a fixed period not exceeding six months
• one in the first three months of a probationary period

4. An employer should give a worker a notification of a reason for dismissal in writing.

This requirement was recently added through revision of the LSA. And it is something distinct from the advance notice of dismissal. An employer should notify a worker of a reason for and date of dismissal in writing, that is, written on paper.

Recently, some Korean companies were known to notify workers of their dismissal through email or text messaging. This will not be valid means of notification anymore according to the position of the Ministry of Labor based on the new requirement.

Failure to give written notification invalidates dismissal, thereby allowing a dismissed worker to bring a case of unfair dismissal.

The ban is based on the recent revision of the “Aged Employment Act” into the “Age-based Employment Discrimination Prohibition and Aged Employment Promotion Act”.

According to the revised act, employers are banned from making age discrimination in . . . → Read More: Age discrimination to be banned from March 2009]]>

The Ministry of Labor announced that age discrimination in recruitment and hiring will be banned from March 2009.

The ban is based on the recent revision of the “Aged Employment Act” into the “Age-based Employment Discrimination Prohibition and Aged Employment Promotion Act”.

According to the revised act, employers are banned from making age discrimination in recruitment and hiring from March 21, 2009.

It is also prohibited for employers to discriminate against workers on the basis of age regarding wage, welfare, education and training, assignment, transfer, promotion and dismissal. The ban on age discrimination for issues other than recruitment and hiring will take effect from January 1st, 2010.

The act also prohibits indirect discrimination by an employer who causes unfavorable results to a certain age group by taking a criteria other than age with no rational reason.

When employers take actions for the above issues but have rational reasons, those actions will not be considered as discrimination.

The rational reasons of such exception given by the act are:

• a certain age is required based on the nature of a job
• Rational differences are made in terms of wage and welfare based on length of service of individual workers
• A retirement age is established according to this act or other acts
• Employers carry out affirmative actions for employment promotion of a certain age group based on this act and other acts

A victim of age discrimination can file a complaint to the National Human Rights Commission. The Commission, after reviewing the complaint, can advise a concerned company to take a measure to redress the problem and notify the Ministry of Labor of such advice.

The Ministry of Labor, when the company does not comply with the advice and such non-compliance has been repetitious or related to a large number of victims, can issue a correction order to the company upon a victim’s request or on its own decision.

The act also stipulates penalties for each case of violation on the part of employers

• Fine up to 5 million Won for age discrimination in recruitment and hiring
• Negligence fine up to 30 million Won for not complying with a correction order by the Ministry of Labor
• Imprisonment up to 2 years or fine up to 10 million Won for dismissing, transferring, punishing or treating unfavorably a worker who filed a complaint or a suit, submitted a document, testified to a relevant authority for age discrimination

——– 

Afterthought

Right after publishing this post,  I found an article covering the same subject here.  Looks like I made a mistake of reinveting the wheel. To compensate for my mistake, I’d like to give a personal observation on the topic.

Requiring a certain age for a job in vacancy posts is still a prevalent practice in Korea. Most entry-level jobs are only for people under 30 to 35. When you are 40-something, you have no job openings except for those aimed at senior managers with, very often, requirements of Master’s degree or even doctoral degree. Many job decriptions in job posts for whitecollar workers simply say something like “only those who were born after 1970 can apply.”

I wonder whether this practice will change with the new act. Will victims – job applicants when discrimination in recruitment is at issue – take the trouble of filing complaints to the NHRC or the Ministry of Labor when the correction order, according to the act, will be mainly about the company stopping discrimination or restoring the state of a victim to that before damage?

As an enforcement decree with details on actual enforcement of the act has yet to come and the effective date is one year further, nothing can be said for sure. But I don’t think that most 40 or 50-someting Korean job candidates will go the extra mile only to watch the company pay 5 million Won fine and some more and their own time spent on complaint procedures. I guess that they will just ignore age discriminatory job posts and keep looking for others.

Just a few sentences from the article are enough to help roughly understand what the company’s labor relations would . . . → Read More: Hyundai Motor’s case]]> While running through past news on labor issues, I found an article by Yonhap News on Hyundai Motor’s move to build overseas plants and a response from its labor union that is famous for repeated strike for the last decade or so.

Just a few sentences from the article are enough to help roughly understand what the company’s labor relations would be like. 

South Korea’s top automaker, has been aggressively building overseas factories as part of its bid to shield itself from labor strikes at home.

The management should build a new plant at home to sustain job security and assuage the concerns of union members. (spoken by a labor union staff during a union-organized forum)

Union leaders clarified that they would demand the management pay higher wages, though they also seek to cut work hours to an 8-hour shift from the current 10-hour shift a day. (at the same forum)

A labor union asking management to stay and even build more plants in Korea, while demanding shorter working hours and higher wages and promising to stage strike to get what they need? I wonder whether labor unions in US or Europe also sound like this when they face their companies’ plan to move out of the country.

As Yonhap site does not provide the full-text, I copy an indirect link here.

Based on the chapter, the following conditions should be fulfilled for any labor contract to be . . . → Read More: Labor contract under the labor standards act]]> The labor standards act of Korea has a chapter named “labor contract”. In my opinion, it is not much of help when one actually tries to draft a labor contract, but it offers some points to remember not to violate law.

Based on the chapter, the following conditions should be fulfilled for any labor contract to be legitimate.

First, some items should be clearly stated to a worker when a labor contract  is signed. Those items are wage, working hours, paid weekly holiday, annual leave, location of work, job to be performed by the worker and so on.

Incidentally, composition of wage, methods of calulating and paying wage , working hours, paid weekly holidays, and annual leave should be stated in written form. In other words, a decent labor contract should explicitly mention the above items.

The labor standards act bans an employer from stating in advance, in a labor contract, the amount of damage to be compensated by a worker for illegal activites or non-compliance with the labor contract.

It, however, does not prohibit an employer from pursuing compensation for a damage actually incurred by a worker. It does not ban an employer from making an article in a labor contract that a worker who had a training or education through expenses by the company should work for a company for certain years to be exempted from obligation to repay the expenses.

Although no mention can be found in the labor standards act, non-disclosure or non-compete agreements also can be inserted in a labor contract. There are some court rulings approving such agreements.

Of course, such agreements are not applicable to all levels of workers. They are usually relevant for senior managers or a certain workers who had access to skills or technologies that are imporant to a company.

Obtaining a decent copy of an English labor contract in Korea is not easy. I have yet to find a single satisfactory labor contract in English based on Korean context. The ministry of labor has not released any authoritative standard sample of labor contract in English.

Maybe it is also due to the tendency  that most companies just state the above essential items and close the labor contract by saying that other matters will be governed by the labor standards act.