On February 28 2018 the National Assembly passed a legislative amendment designed to reform the Labour Standards Act. This update summarises the notable changes below.

Work week redefined

Existing law

Amended law
  • The definition of 'work week' is interpreted by the Ministry of Employment and Labour as being five days (eg, Monday to Friday), with up to 12 hours of overtime permitted per week.
  • Therefore, employers are allowed a maximum of 68 working hours per week (ie, 40 hours on weekdays, 12 hours of overtime per week, eight hours on Saturdays and eight hours on Sundays), assuming the typical Monday to Friday work week.
  • 'Work week' is defined as seven days, including weekends (Monday to Sunday), while weekly overtime remains limited at 12 hours.
  • Therefore, employers will be limited to a maximum of 52 working hours per week (ie, 40 hours for the entire work week, plus 12 hours of overtime).

The effective dates of the amendment depend on the size of the business, as follows:

  • July 1 2018 – businesses with 300 or more employees;
  • January 1 2020 – businesses with 50 to 299 employees; and
  • July 1 2021 – businesses with 49 or fewer employees.

From July 1 2021 to December 31 2022, employers with fewer than 30 employees may enforce eight extra working hours per work week in addition to the 52-hour limit via a separate written agreement with the employee representative.

Exemptions to weekly overtime hours

Existing law

Amended law
  • Businesses that operate within one of 25 enumerated industries are exempt from the 12-hour limit on the weekly overtime hours.
  • These industries include sales, finance insurance, film production, telecoms, education/research, advertisement and hospitality industries.
  • Exempt industries are curtailed to just five industries (ie, land transportation (excluding bus companies), marine transportation, air transportation, other transportation services (eg, parcel delivery) and healthcare industries).
  • Exempt employers must also allow at least 11 consecutive hours of rest before each work day.

The effective date of the amendment is September 1 2018.

Compensation for overtime and holiday work

Existing law

Amended law
  • There is ongoing debate over whether work performed on a day off or holiday (beyond the 40-hour limit per work week) is eligible for both overtime and holiday work allowances.
  • An employee who works for less than eight hours on a day off or holiday is entitled to 150% of his or her ordinary wage as holiday allowance.
  • An employee is entitled to 200% of his or her ordinary wage only when he or she works for more than eight hours on a day off or holiday as both overtime and holiday work.

The amendment is effective from the date of promulgation and will apply to all day off or holiday work performed thereafter. However, whether the rule will apply to work that has already been performed on a day off or holiday remains to be decided by the Supreme Court.

If the Supreme Court holds that employees may be entitled to both overtime and holiday work allowances for certain hours during days off or holiday, employers may be liable for any differences in wages going back up to three years (ie, the statute of limitations for wage claims).

Public holidays now apply to private sector

Existing law

Amended law
  • The Ordinance concerning Holidays of Government and Public Officers stipulates the mandatory public holidays (ordinance holidays) for the public sector.
  • Recognition by the private sector is optional.
  • Ordinance holidays are now mandatory public holidays for private-sector employers as well.

The new law seeks to address the disparity between public and private-sector employees, and will come into effect starting from January 1 2020, depending on the size of the business. The new law would have no impact on employers that already recognise the ordinance holidays as paid holidays per their respective rules of employment or other holiday policies.

Potential impact

The new legislation is projected to have a significant impact on all industries and levels. According to a study by the Korea Economic Research Institute, the additional annual labour costs that companies will incur is likely to exceed W12 trillion ($11 billion) in total.

At this time, businesses should:

  • monitor the working hours of employees to ensure that the business does not exceed the reduced limit on weekly working hours;
  • review internal policies to adjust to the new legislative requirements gradually, by:
    • reducing extended working hours;
    • reviewing existing comprehensive wage systems (if any) and the working hours recognised thereunder; and
    • introducing a compensatory holiday system to offset the additional labour costs caused by the reduced limit on weekly working hours;
  • consider introducing greater flexibility in employee working hours via a selective or comprehensive working hour system;
  • review holiday policies to ensure that all ordinance holidays are recognised as paid annual holidays or introduce alternative measures, such as substitute holiday systems; and
  • prepare budgeting and contingency plans for aggressive demands from employees in future collective and wage agreement negotiations in light of the legislative changes.

For further information on this topic please contact Sang Hoon Lee or William Woojong Kim at Lee & Ko by telephone (+82 2 772 4000) or email ([email protected] or [email protected]). The Lee & Ko website can be accessed at www.lawleeko.com

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