PERSOL HR DATA BANK in APAC KOREA

Transcription

1 PERSOL HR DATA BANK in APAC KOREA L a b o r La w s March 2019

2 introduction Employment and labor laws in the Republic of Korea are applied uniformly to both Korean nationals and foreigners working in Korea, and employees may enjoy the benefits of protection by employers that are given based on its employment and labor laws, even upon choosing the governing law of another country. The Labor Standards Act prescribes the minimal standards of working conditions, and broadly protects employees working in Korea. A company may not dismiss an employee without due cause, and employees are protected heavily as represented by precedents which state that the foregoing "due cause" must be a critical factor in which the continued employment of that employee will place excessive burden on the employer. The employment of foreign workers is classified based on the type of visa, and, while a segmentalized visa system is in place, Korea adopts a policy which enables foreigners to acquire a visa relatively easily.

3 INDEX 1. Points to consider regarding labor management in Korea, characteristics of labor practice in Korea, and status of recent labor policy Labor law system that aims to protect individuals Acquisition of visas Trade unions 3 2. Overview of basic labor laws of Korea Overview of labor-related statutes Main laws that correspond to individual labor laws Main laws that correspond to collective labor laws Overview of main sources of laws prescribing employment relations 7 3. Duty to prepare Employment Handbook (Rules of Employment) in Korea, and contents of such Employment Handbook Duty to prepare Employment Handbook Subordination of legal binding force of Employment Handbook Disadvantageous revision of Employment Handbook Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea Minimum Wage Act Employee Retirement Benefit Security Act Working hour system under the Labor Standards Act Method and points to consider regarding ordinary dismissal, punitive dismissal, and dismissal on grounds of reorganization in Korea Restriction on dismissal Types of foreigner visas (passes) and acquisition requirements 25 Types of visas 25 About this document 27 About the information compiled in this document 27 Contact information regarding this document 27 Company profile 28 About PERSOL Research and Consulting 28 About PERSOLKELLY Consulting 28

4 1. Points to consider regarding labor management in Korea, characteristics of labor practice in Korea, and status of recent labor policy 1-1. Labor law system that aims to protect individuals Laws related to employment and labor in the Republic of Korea (hereinafter referred to as "Korea") not only apply to Korean nationals, they uniformly apply to foreigners working in Korea, and, even if a governing law of another country is chosen at the time of concluding a contract, workers are protected under such laws related to employment and labor. As the main sources of laws that prescribe employment-related matters, there are, for instance, the Constitution, the Labor Standards Act (law corresponding to the Japanese Labor Standards Act) (hereinafter referred to as the "Labor Standards Act" or the "Act"), the Employment Permit System, the Minimum Wage Act, and the Employee Retirement Benefit Security Act, and the working conditions of workers are mainly prescribed under these laws. The Labor Standards Act prescribes the minimum standards of working conditions, broadly protects workers who work in Korea, and is applied preferentially to provisions that are disadvantageous to workers. Thus, for example, if there is any inconsistency between the labor contract concluded by the worker and the Labor Standards Act and the conditions of the labor contract fail to satisfy the standards set out in the Labor Standards Act, the labor contract is invalid. Meanwhile, it should be noted that, even if a special agreement that supersedes the standards of the Labor Standards Act is prescribed, such special agreement will remain valid. In other words, a labor contract that contains an inconsistency is not entirely invalid, and only the parts of the labor contract prescribing working conditions that fail to satisfy the standards set out in the Labor Standards Act are deemed invalid, and only such parts of the labor contract are replaced with statutory standards. Furthermore, a company must not dismiss its worker without a justifiable reason. According to the court, a "justifiable reason" for dismissing a worker must be a critical factor in which the continuation of employment of such worker would become an excessive burden for the company. When a company is to dismiss a worker, the company must notify the worker at least 30 days in advance, and, if the company fails to send a dismissal notice at least 30 days in advance, the company is required to pay more than 30 days worth of standard wages to the worker. Meanwhile, the rules are also similar in Japan, and when a company is to dismiss a worker, such dismissal is not deemed a lawful dismissal unless it is based on objectively rational grounds, which are acceptable under social standards, and the company is also obligated to send a dismissal notice to the worker at least 30 days in advance. While there are minor differences between the countries; for instance, in Korea, a company is required to notify the grounds of dismissal and timing of dismissal in writing upon declaring its intent to dismiss a worker, and the specific requirements of dismissal on grounds of reorganization are clearly set out in the Labor Standards Act, there is no crucial difference. Because both Japan and Korea prescribe strict procedures and require lawful and rational grounds in dismissing workers, it is obvious that both countries are taking the stance of generously protecting workers. Moreover, the recent EPL (Employment Protection 1. Points to consider regarding labor management in Korea, characteristics of labor practice in Korea, and status of recent labor policy 2

5 Legislation) index announced by the OECD also indicates that both Japan and Korea are positioned equally as countries that stress the protection of regular employment. In light of the above, it could be said that both countries have similar labor laws that generously protect workers based on a system design where companies must not easily dismiss their workers Acquisition of visas When a foreigner is to work in Korea, he/she is required to attain the status of sojourn eligible for employment activities (Immigration Control Act, Article 18). Whether a foreigner may engage in employment activities is classified according to the issued visa. Generally speaking, a foreigner is required to acquire the proper visa prior to entering Korea for the purpose of business or work. A company must not employ a foreigner who does not have a proper visa. Thus, the acquisition of a proper visa becomes important, and it is standard practice to acquire the visa of Supervisor (D-7) or the visa of Corporate investor (D-8) in Korea when a Japanese company is to expand its business to Korea or when a Japanese national is to start a business in Korea. It generally takes roughly 1 month to 1.5 months for acquiring a visa, and the cost is normally less than $100. Based on the foregoing period and cost, while it may appear that a visa can be quickly and easily acquired in Korea, the screening process for determining whether the applicant has the qualification for employment and to what area the applicant may conduct activities is extremely strict, and permission is not granted unless the applicant has sophisticated skills, expertise or a degree, and it is not easy to acquire a visa in Korea. Meanwhile, when a foreign company is to conduct business in Japan, the company is required to file with, and acquire from, the Immigration Bureau a status visa, or a work visa, which permits its employees to work in Japan. The cost of this visa is roughly the same as in Korea, and it usually takes roughly 3 to 4 months for this visa to be issued. While there are standards for screening the applicants of this visa, the details thereof are considerably vague, and the standards of judgment of inspectors are also unclear. Thus, judgment is sometimes changed pursuant to the social conditions and international affairs at such point in time. Accordingly, similar to Korea, it is also difficult for applicants to acquire a visa and work in Japan. When comparing the foregoing current conditions, while there are slight differences between the systems, it could be said that both countries do not issue visas easily, and are maintaining a strict stance in their screening process Trade unions While there are various organizational forms of trade unions; for instance, craft unions, industrial unions, enterprise unions, general unions, and national centers, the most macro organizational form is the national center of trade unions. As national centers in Korea, there are the following two major trade unions; specifically, the Federation of Korean Trade Unions (FKTU) and the Korean Confederation of Trade Unions (KCTU). FKTU is Korea s largest national center having 843,000 members and 3,028 unions as of FKTU has 25 industrial organizations under its wing, and many of the members belong to the 1. Points to consider regarding labor management in Korea, characteristics of labor practice in Korea, and status of recent labor policy 3

6 sectors of metal, finance, automobiles, taxies, chemicals and public service organizations. FKTU was established in 1961, and during the military occupation that lasted for 30 years thereafter, FKTU was predominantly a company-dominated union that accepted the labor control of the government. Nevertheless, after democratization was achieved pursuant to the start of the civilian regime in 1993, FKTU made a clear departure from the conventional pro-government line such as through a general strike by organizations under FKTU and a joint struggle with KCTU. Furthermore, while FKTU previously participated in the policy-making process based on an agreement among the government, workers and companies, FKTU withdrew from the Tripartite Commission as a result of rabidly opposing the government and companies with regard to the revision of labor-related laws, and its participation in the policy-making process is not necessarily going well. KCTU is a national center having 636,000 members and 373 unions as of KCTU has 16 member organizations under its wing, and, in addition to industrial organizations including government officials, teachers, metal, finance, public transportation and construction, KCTU also has female trade unions and union of non-regular personnel of schools. The non-government labor force that grew by taking advantage of the South Korean strike wave of 1987 known as the "Great Workers Struggle" established KCTU in One reason that the number of unions of KCTU is considerably smaller than FKTU is due to the integration of unions pursuant to the promotion of industrial unions. Furthermore, while the number of members of KCTU is also roughly 200,000 members and fewer in comparison to FKTU, many major corporations such as Hyundai Motor are members, and, when a labor dispute arises, in many cases the labor dispute becomes large-scale and serious. Meanwhile, KCTU is focusing on the organization of non-regular workers, and independent unions of non-regular workers are often established with the support of KCTU. 1. Points to consider regarding labor management in Korea, characteristics of labor practice in Korea, and status of recent labor policy 4

7 2. Overview of basic labor laws of Korea 2-1. Overview of labor-related statutes The main labor-related statutes in Korea are as follows. Overview of the main sources of law are described below. Constitution: The Constitution of Korea adopts basic principles in employment. Article 32 of the Constitution prescribes that all citizens shall "have the right to work", and additionally prescribes that the State must guarantee human dignity by establishing laws related to minimum wage and working conditions. Article 32 of the Constitution additionally prescribes the prohibition of sexual discrimination in terms of employment and working conditions, special protection for working children, and preferential opportunities of employment to wounded veterans and policemen, and members of the bereaved families of military servicemen and policemen killed in action. As described above, the Constitution protects the "right to work" of all citizens as the most significant concept. While various labor laws have been established in order to realize the "right to work" prescribed under the Constitution, the labor laws of Korea can be additionally classified as [individual labor laws] and [collective labor laws]. The former is characterized in that the State guarantees a certain level of standards or higher with regard the contents, conclusion and types of labor relations, and, as representative examples, there are the Labor Standards Act, the Act on the Protection, etc. of Fixed-term and Part-time Employees, the Employee Retirement Benefit Security Act, the Minimum Wage Act, and the Act on Equal Employment and Support for Work-Family Reconciliation. As for Labor Standards Act, a proposed amendment was voted by the Korea National Assembly on February 28, 2018 and passed by a majority vote. The latter includes legal systems that prescribe standards of collective autonomy between companies and workers, and, as representative examples, there are the Trade Union and Labor Relations Adjustment Act, the Labor Relations Commission Act, and the Act on the Promotion of Worker Participation and Cooperation Main laws that correspond to individual labor laws (1) Laws related to labor standards (i) Labor Standards Act (ii) Minimum Wage Act (iii) Certified Labor Affairs Consultant Act (iv) Wage Claim Guarantee 2. Overview of basic labor laws of Korea 5

8 Act (v) Employee Retirement Benefit Security Act (vi) Act on the Protection, etc., of Dispatched Workers (vii) Act on the Protection, etc. of Fixed-term and Part-time Employees (viii) Framework Act on Labor Welfare (2) Laws related to equal employment (i) Act on Equal Employment and Support for Work-Family Reconciliation (ii) Act on Employment Promotion and Vocational Rehabilitation for Disabled Persons (iii) Act on Prohibition of Age Discrimination in Employment and Aged Employment Promotion (iv) Act on the Promotion of the Economic Activities of Career-Break Women, etc. (3) Laws related to vocational training and qualifications (i) Workers Vocational Skills Development Act (ii) Vocational Education and Training Promotion Act (iii) National Technical Qualification Act (iv) Workers Vocational Skills Development Act(v) Basic Act on Qualifications (vi) Act on Human Resources Development Service of Korea (4) Laws related to industrial safety and health (i) Industrial Safety and Health Act (ii) Act on the Prevention of Pneumoconiosis and Protection, Etc., of Pneumoconiosis Workers (iii) Korea Occupational Safety and Health Agency Act (5) Laws related to employment/industrial accident insurance (i) Employment Insurance Act (ii) Act on the Collection, Etc., of Premiums for Employment Insurance and Industrial Accident Compensation Insurance (iii) Industrial Accident Compensation Insurance Act (6) Laws related to employment services (i) Basic Employment Policy Act (ii) Occupational Safety and Health Act(iii) Social Enterprise Promotion Act (iv) Act on the Employment Improvement, Etc., of Construction Workers (v) Juvenile Activity Promotion Act (vi) Act on Foreign Workers Employment, Etc. (vii) Act on Trade Adjustment Assistance Following the Free Trade Agreements (7) Laws related to labor-management cooperation (i) Act on the Promotion of Worker Participation and Cooperation (ii) Labor Relations Commission Act (iii) Act on the Tripartite Commission for Economic and Social Development, (iv) Act on Enactment of Labor Day (v) Act on Support for Development of Labor Management Relations 2. Overview of basic labor laws of Korea 6

9 2-3. Main laws that correspond to collective labor laws Laws related to trade unions (i) Trade Union and Labor Relations Adjustment Act (ii) Act on the Establishment and Operation, Etc. of Public Officials Trade Unions (iii) Act on the Establishment and Operation, Etc. of Trade Unions for Teachers 2-4. Overview of main sources of laws prescribing employment relations Labor Standards Act: The purpose of the Labor Standards Act is to set forth the minimum standards related to wages, working hours and other working conditions, and thereby secure and improve the living standards of workers, and achieve a well-balanced development of the national economy. The Labor Standards Act serves the central role among labor-related laws, and prescribes the minimum working conditions including the standards of overtime allowance, holidays and other paid leaves, retirement allowance, and other allowances and payments to be provided by the company to its workers. On February 28, 2018, a bill to amend the Labor Standards Act was enacted. The revised Act has been applied to workplaces and public institutions with 300 or more employees from July 1, Meanwhile, the Act will be applied to workplaces with 50 to 299 employees from January 1, 2020, and to workplaces with 5 to 49 employees from July 1, Major revisions of the Act are as follows: (1) Lowering of practical upper limit of maximum weekly working hours including holidays (52 hours); (2) Temporarily approval to extend working hours for workplaces with less than 30 employees; (3) Lowering of upper limit of maximum working hours for working minors under the age of 18; (4) Clarification of premium pay rate for holiday work; (5) Revision of the business types specified as exceptions in terms of working hours; and (6) Guarantee for the payment of wages for holidays designated by President. The Labor Standards Act applies to all companies that are continuously employing 5 workers or more. Furthermore, the condition of "employing 5 workers or more" includes foreign workers, and is similarly applied to all workplaces in Korea. The violation of a specific provision of the Labor Standards Act is punishable by criminal sanction. Minimum Wage Act: The purpose of the Minimum Wage Act, as revised on January 1, 2015, is to stabilize the living standards of workers and improve the quality of the labor force by guaranteeing the minimum wage level of workers, and thereby contribute to the robust development of the national economy. This Act applies to all businesses and workplaces that employ workers (Scope of Application). However, the following wages which correspond to those prescribed by the Minister of Employment and Labor are excluded from the scope 2. Overview of basic labor laws of Korea 7

10 of calculation of minimum wage: (i) wages other than the wages that are periodically paid on a monthly basis; (ii) wages other than the wages that are paid based on prescribed working hours or prescribed work days; and (iii) other wages that are deemed inappropriate to be included in the amount of minimum wage. Employee Retirement Benefit Security Act: The Korean government requires all workplaces to implement a severance payment plan. However, while this Act applies to all businesses and workplaces, it does not apply to businesses that only employ relatives living together and domestic employment activities. The purpose of this Act is to secure the workers stable livelihood in their old in preparation for the aging society. However, it should be noted that the application of this Act is exempted with regard to workers whose continuous years of services are less than 1 year and part-time workers (workers who work less than 15 hours per week based on a 4-week average). Trade Union and Labor Relations Adjustment Act: Beginning with the 1953 "Trade Union Act" and "Labor Dispute Adjustment Act", and, after the enactment of the 1997 "Trade Union and Labor Relations Adjustment Act", this Act was partially revised in The purpose of this Act is to maintain and improve the working conditions as well as the economic and social status of workers by securing their right to organize, right to bargain collectively, and right to act collectively under the Constitution (Purpose (i)), and to contribute to the maintenance of industrial peace and the development of the national economy by preventing and resolving labor disputes through fair adjustment of labor relations (Purpose (ii)). 2. Overview of basic labor laws of Korea 8

11 3. Duty to prepare Employment Handbook (Rules of Employment) in Korea, and contents of such Employment Handbook 3-1. Duty to prepare Employment Handbook In Korea, similar to Japan, a company that is constantly employing 10 workers or more is obligated to prepare an Employment Handbook and additionally obligated to submit such Employment Handbook to the Minister of Employment and Labor. Based on Article 93 of the Labor Standards Act, a company is required to specify the following matters in its Employment Handbook. If a company violates Article 93 of the Act, the employee will be punished by a fine not exceeding 5 million won pursuant to Article 116, Item 2 of the Act. The decision-making process of working conditions in Korea is basically the same as Japan; specifically, the Labor Standards Act determines the overall minimum level of working conditions, and the labor agreement, the Employment Handbook, and individual labor contracts determine the detailed working conditions. 3. Duty to prepare Employment Handbook (Rules of Employment) in Korea, and contents of such Employment Handbook 9

12 The procedures for preparing and revising the Employment Handbook are required to go through the same process as in Japan. When a company is to prepare or revise the Employment Handbook, the company is required to listen to the opinions of a trade union, in cases where there is such a trade union which is composed of a majority of the workers, and to the opinions of a majority of the workers if there is no such trade union. In the foregoing case, it would be sufficient for the company to listen to their opinions, and the company is not obligated to be bound by those opinions. If a company violates the foregoing procedures for listening to opinions, the company will be punished by a fine not exceeding 5 million won pursuant to Article 114, Item 1 of the Act Subordination of legal binding force of Employment Handbook All valid Employment Handbooks that are prepared and revised by the company have the effect of prescribing labor relations. Unless there is tangible proof, the stance of judicial precedents is that interpretations and findings that ignore the objective meaning of the wording must be made carefully and strictly. When prescribing the details of labor relations, there are, for instance, labor contracts, collective agreements and laws related to labor relations in addition to the Employment Handbook, and there is an order of superiority regarding the effect of these documents and laws. In other words, according to Article 96 of the Act and Article 33, Paragraph 1 of the Trade Union and Labor Relations Adjustment Act, an Employment Handbook must not be in violation of laws or in breach of the collective agreement applicable to the workplace, and an Employment Handbook containing such violation or breach is null and void. Nevertheless, as a general rule, under a labor contract, an Employment Handbook is applied preferentially over individual agreements. Accordingly, a labor contract which prescribes working conditions that fail to satisfy the standards set out in an Employment Handbook is invalid with regard to such part, and such invalid part will be subject to the standards set out in the Employment Handbook Disadvantageous revision of Employment Handbook A principle of requiring a collective agreement has been established when disadvantageously revising the Employment Handbook in Korea. Similar to Japan, Korea has continued its debate regarding the disadvantageous revision of working conditions pursuant to the revision of the Employment Handbook as a major problem. What differs from Japan is that, in Korea, an explicit decision to the effect that a collective agreement is required for a disadvantageous revision was rendered in Furthermore, subsequently when the Labor Standards Act was revised in 1989, the former was adopted and rules to the effect of requiring a collective agreement for a disadvantageous revision of the Employment Handbook were clearly established. However, a judicially created doctrine which permits a disadvantageous revision, so as long as it was rational, continued to be simultaneously used in courts. 3. Duty to prepare Employment Handbook (Rules of Employment) in Korea, and contents of such Employment Handbook 10

13 Article 94, Paragraph 1 (Procedures for Preparation of and Amendment to Rules) of the existing Labor Standards Act prescribes as follows: "An employer 1 shall seek consultation of a trade union, if there is a trade union composed of the majority of the workers in the workplace concerned, or the consultation of the majority of workers if there is no trade union composed of the majority of the workers, with regard to the preparation of and amendment to the rules of employment. However, if the rules of employment are to be modified unfavorably to workers, the employer shall obtain workers consent." Accordingly, pursuant to the proviso of the foregoing provision, any disadvantageous revision of working conditions under the Employment Handbook requires the "consent" of a majority of the members of a trader union or a majority of the workers (this differs from the "representative of a majority" of Japan). This proviso is a stipulation of the judicially created doctrine of 1977 pursuant to the revision of the Labor Standards Act in Nevertheless, as described above, while the principle has been stipulated, it should be noted that courts continue to maintain and argue the rationality theory in the form of contradicting the foregoing principle under the statute, and mutually contradictory rules continue to exist. Meanwhile, under the laws of Japan, the legal principle of reasonably revising the Employment Handbook, as a judicially created doctrine, has become the law without any change. The principle of collective agreement based on a majority that has been established under the statute appears to be, at a glance, a generous protection of workers. Nevertheless, from a different perspective, if no adjustment is possible without a collective agreement, it would be easier to raise issues related to dismissal and other matters, and the possibility of being adverse to the workers interests cannot be denied from a long-term perspective. Furthermore, the fact that disadvantageous provisions can be changed so as long as a collective agreement of a majority is obtained means that, on the other hand, the minority that is against such change would be bound by such change, irrespective of the subject matter of such disadvantageous provisions, once the change is determined based on a collective agreement of a majority, and the issue of serious infringement could be raised. Which is why it appears that courts are keeping their doors open to enable changes, so as long as the changes are rational, even without a collective agreement in order to prevent the provocation of serious abuse of human rights or other irrational issues, and reasonably taking measures as needed in relation to complex labor-management relations. 1.In this report, the terms "Company" and "Employer" shall be used as the same meaing. 3. Duty to prepare Employment Handbook (Rules of Employment) in Korea, and contents of such Employment Handbook 11

14 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 4-1. Minimum Wage Act Under the Minimum Wage Act, which was enacted on December 31, 1986 and thereafter revised on and enforced from January 1, 2015, the Minister of Employment and Labor requests the discussion of minimum wage. The Minimum Wage Council thereafter discusses the minimum wage within 90 days, and the Minister of Employment and Labor announces the result. If objections are raised by workers or the company s representative, additional discussions are requested as needed, and the Minister of Employment and Labor thereby determines and announces the minimum wage. The application period is from January 1 of the following year to December 31 of that year. The Minimum Wage Council is composed of a total of 27 councilors - 9 councilors each representing workers, companies and public interest - who are appointed by the President once they are nominated by the Minister of Employment and Labor. While the minimum wage applies to all businesses and workplaces that employ 1 or more workers, reduction in the amount of minimum wage applies to certain workers. For example, there are measures in which an amount, which is roughly 10% less than the amount of minimum wage, is applied as the minimum wage to workers during their training period (approximately 3 months). When a company is to apply the minimum wage, the company must pay wages to its workers in an amount that is not less than the amount of minimum wage. A labor contract in violation of this rule is invalid, and it will be deemed that such labor contract was a contract for paying an amount that is the same as the amount of minimum wage. A company in violation of this rule will be punished by imprisonment of up to 3 years and/or by a fine not exceeding 20 million won. The minimum wage is decided annually by the Minimum Wage Council pursuant to the Minimum Wage Act. The hourly minimum wage applied from 2017 was increased by 7.3% in comparison to 2016 (6,030 won), and it is now 6,470 won. The minimum wage of 2017 was decided upon an unprecedented prolonged discussion period. This is because the companies asserted the deferment of 6030 won (per hour) of 2016 and the workers asserted 10,000 won, and companies and workers sharply disagreed from the very beginning, and, while heated arguments were continued with both sides being adamant regarding their original plan, the discussions remained as far apart as ever with neither side submitting a proposed amendment. Ultimately, without any progress whatsoever, the foregoing amount of minimum wage was adopted and decided by the Minimum Wage Council on July 16, 2016, and announced by the Minister of Employment and Labor on August 5. It should be also noted that the minimum wage has been significantly increased since January In recent years, the minimum wage in Korea has been increased around 7% every year. Further, in 2018, the Council unexpectedly decided to increase the amount of minimum wage by 16.4%, as a result of which the minimum wage was increased to "7,530 won". Although there have been a lot of strong reactions from companies against the substantial increase in a short term, it has been officially enforced from January 2018 in nationwide. 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 12

15 Provisions related to overtime Labor Standards Act, Article 56 (Extended Work, Night Work and Holiday Work) For any extended work (referring to work that was extended pursuant to the provisions of Article 53, Article 59 and proviso of Article), night work (referring to work provided from 10 pm to 6 am) or holiday work, 50% or more of the ordinary wages shall be added to the ordinary wages that the company is required to pay. It was determined that, from 2018, the amount of wages need to be paid to employees for holiday work will be specified more clearly in Article 56 of the Act. It should be noted that 150% of the ordinary wages shall be paid for holiday work within 8 hours, and 200% of the ordinary wages shall be paid for holiday work exceeding 8 hours. When a company and a worker reach an agreement, overtime work exceeding the statutory working hours, up to 12 hours per week, is allowed. In addition, the number of types of business that are eligible for a provision which allows a company to have its workers work over 12 hours per week as exceptional cases upon obtaining a written agreement with such workers has been substantially reduced by the revision of the Act in The provision has been criticized for a long time since the scopes of business that may force overtime work are too broad. Following the revision in 2018, the number of the types of business was reduced from 26 to 5. In accordance with the revision, it was further stipulated that the company shall provide workers with at least 11 hours of break until the start of next work if the company s business falls under the revised scope. [Scope of business stipulated in the Act before revision] 1. transportation business, goods sales and storage business, finance and insurance business; 2. movie production and entertainment business, communication business, educational study and research business, advertising business; 3. medical and sanitation business, hotel and restaurant business, incineration and cleaning business, barber and beauty parlor business; and 4. other businesses determined by the President in consideration of the character of a business and public conveniences (social welfare business). 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 13

16 [Scope of business stipulated in the revised Act] 1. land transportation and pipeline transportation business (excluding passenger car transportation business based on Article 3 (1) item 1 of the "Passenger Car Transportation Business Act" ) 2. water carriage business; 3. air transportation business; and 4. insurance business. Also, in Korea, the system of using leave as compensation has been introduced pursuant to Article 57 (System of Using Leave as Compensation) of the Labor Standards Act. Thus, upon reaching a written agreement with its worker, the company may, in lieu of paying additional wages, grant a leave to the worker to compensate for the extended work, night work and holiday work prescribed in Article 56 of the Act. The former Act stipulated that a company in violation of the foregoing system would be punished by imprisonment up to 2 years or by fine not exceeding 10 million won (former Labor Standards Act, Article 110); however, after the revision, the fine was increased to 20 million won; the revised Act has been implemented since May 29, Employee Retirement Benefit Security Act A company is required to establish one or more severance payment plans [retirement allowance plan and retirement benefit plan (Defined Benefit and Defined Contribution)], and the company is required to obtain the consent of a majority of the workers (majority of members of the trade union) when selecting or changing the type of severance payment plan. Defined Benefit: A retirement pension plan under which the level of benefits a worker will receive is determined in advance, and the company s burden of contribution will vary depending on the investment results of the fund. Defined Contribution: A retirement pension plan under which the level of contributions a company should make to pay benefits is determined in advance, and the amount of pension to be received by the worker will vary depending on the investment results of the fund. 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 14

17 When a company is to establish a retirement benefit plan, the company is required to prepare a "retirement pension agreement", obtain the consent of a majority of the workers, and notify the Ministry of Employment and Labor. A retirement pension agreement corresponds to a design sheet of a retirement benefit plan of individual workplaces, and must satisfy the requisite items and statutory minimum standards (establishment of severance payment plan). Services related to the management of the retirement benefit plan (investment management services and asset management services) must be entrusted to retirement pension business operators (financial institutions) (management method of retirement benefit plan). The term "investment management services" refers to the services of presenting the fund investment method and managing the records of the investment status, and the term "asset management services" refers to the services of receiving the company s contributions and maintaining/managing the funds. A business operator to handle retirement pension as a qualified financial institution of retirement pension (retirement pension business operator) is required to satisfy certain requirements and register with the Minister of Employment and Labor (entrusted to the Financial Services Commission). Furthermore, a retirement pension business operator is required to explain and educate the members, at least once a year, on the investment status of the retirement benefit plan. Registration requirements include asset management companies, insurance companies, banks, securities firms and other equivalents that satisfy the financial robustness standards and personnel/physical requirements set forth by the President. In cases where the received lump-sum payment is to be deposited in a personal retirement account upon switching jobs, the imposition of tax is deferred, and workers are guaranteed a certain amount of payment Working hour system under the Labor Standards Act The Labor Standards Act prescribes, as the "statutory standard working hours", "not more than 8 hours per day, and not more than 40 hours per week, excluding recess hours" (Labor Standards Act, Article 50) as one of the important working conditions, and further prescribes that an agreement between the parties is required for any work exceeding the foregoing statutory standard working hours. Although the former provision may have been construed as allowing the maximum working hours per week up to 68 hours, 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 15

18 the revision was enacted to lower the limit to 50 hours on February 28, Currently, the working hour system of 40 hours per week is applicable to a workplace of 5 workers or more. However, because the provisions related to working hours and holidays under the Labor Standards Act do not apply to workplaces of less than 5 workers, it should be noted that the system of 2 days off per week does not apply to these workplaces. (1) General rule of statutory working hours Labor Standards Act, Article 50 (Working Hours) (i) Working hours per week shall not exceed 40 hours excluding recess hours. (ii) Working hours per day shall not exceed 8 hours excluding recess hours. (iii) In calculating the working hours pursuant to Paragraph 1 and Paragraph 2, the stand-by time pursuant to the instructions or supervision of the employer shall be deemed "working hours". Primarily, the Labor Standards Act was revised (August 2003) for realizing a 5-day work week system (40-hour working system), and, pursuant to the foregoing revision, the statutory working hours were gradually shortened from 44 hours per week to 40 hours per week from July 2004 onward in accordance with the number of workers of the workplace. From July 2011 onward, this system became applicable to all businesses excluding workplaces with less than 5 workers, but it should be noted that an important amendment was enacted on February 28, While the former Labor Standards Act stipulated that the maximum working hours per week shall be 40 hours and only 12 hours of overtime work shall be permitted, the Employment Office has interpreted that holiday work hours were not included in the calculation of 40 working hours per week. That is, it was understood that the practical maximum working hours per week was 68 hours, including 12-hours of overtime and 16 hours of holiday works in addition to 40 hours of ordinary work from Monday through Friday. However, as the problem of long working hours have gained international attention in recent years, the Act was revised to amend the definition of "One week" under Article 50, which was the basis of calculating the working hours per week, to mean 7 days including weekend so that it will no longer be permitted to work over 52 hours per week including weekend. The revised Act has been applied to workplaces and public institutions with 300 or more workers from July 1, It will also be applied to workplaces with 50 to 299 workers from January 1, 2020 and to workplaces with 5 to 49 workers from July 1, It remains unchanged that this 40 hours of work regulation is applicable only to workplaces with 5 or more workers. 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 16

19 (2) Overtime work, night work and Sunday/holiday work When an agreement is reached between the company and the worker, overtime work in excess of the statutory working hours is permitted up to 12 hours per week. For overtime work, night work (from 22:00 to 6:00) and Sunday/holiday work, the company is required to pay 50% or more of the ordinary wages as extra wage. Furthermore, when an agreement is reached between the worker and the company, the company may also offer a substitute holiday in substitute for prescribed working hours in lieu of paying the foregoing extra wage. (3) Flexible working hour system A) Not more than 2 weeks Labor Standards Act, Article 51 (Flexible Working Hour System) (i) An employer may have a worker work in accordance with rules of employment (or in accordance with rules or regulations equivalent thereto) for a specific week in excess of working hours prescribed in Article 50 (1), or for a specific day in excess of working hours prescribed in Article 50 (2), on condition that average working hours per week in a certain unit period of not more than 2 weeks do not exceed the working hours under Article 50 (1), provided that working hours in any particular week shall not exceed 48 hours. (ii) Where an employer reaches an agreement in writing with a workers representative on the following enumerated items, the employer is allowed to have a worker work for a specific week in excess of the working hours under Article 50 (1), or for a specific day in excess of the working hours under Article 50 (2), on the condition that average working hours per week in a certain unit period of not more than 3 months do not exceed the working hours under Article 50 (1). However, working hours for a specific week, and for a specific day shall not exceed 52 hours and 12 hours respectively: (a) scope of workers subject to this paragraph; (b) unit period (a unit period not exceeding 3 months must be prescribed); (c) working days in a unit period and working hours for each working day; and (d) other matters prescribed by the President. (iii) The provisions of paragraphs (1) and (2) shall not apply to workers aged between 15 or older and less than 18, and pregnant female workers. (iv) If an employer needs to have a worker work in accordance with the provisions of paragraphs (1) and (2), the employer shall prepare measures to ensure that the existing wage level is not lowered. Significance: The term "flexible working hour system" refers to a system where it will not constitute a violation of the working hours even when standards working hours are exceeded on a specific day or in a specific week to the extent that the working hours of 1 day or 1 week do not exceed the statutory working hours by taking a certain period such as 2 weeks or 3 months as the average, and the company is not required to pay extra wage for the extended work. By extending the working hours when the company is busy and shortening the working hours when the company is not busy, the company is given flexibility in managing the working hours of its workers. Time restriction: Even when a flexible working hour system of not more than 2 weeks is introduced, working hours of a specific week must 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 17

20 not exceed 48 hours. Nevertheless, because there is no specific restriction regarding the working hours on a specific day, it could be interpreted that, from a legal perspective, all-night work is permitted on a specific day. However, under a "flexible working hour system of not more than 3 months", it should be noted that working hours on a specific day must not exceed 12 hours, and are desirably "less than 12 hours". Extended work in implementing flexible working hour system: Even when a flexible working hour system is implemented, workers may also engage in extended work to the extent of not exceeding 12 hours per week pursuant to the provisions of Article 53, Paragraph 2 of the Act. Provisions in Employment Handbook: A flexible working hour system of not more than 2 weeks may be implemented by prescribing the system in the Employment Handbook or an equivalent document. When a flexible working hour system is specified by preparing or revising an Employment Handbook based on lawful procedures, the consent of individual workers is not required. Specification of working hours in advance for each corresponding work day: Because a labor contract and an Employment Handbook are required to specify the starting time and finishing time of work, when introducing a flexible working hour system of not more than 2 weeks, the company is required to specify in advance the starting time and finishing time of a specific week. Effective term: Under laws, there are no specific provisions regarding the effective term. Because the operation of the system is to be pursuant to the Employment Handbook, if the effective term is not separately prescribed, the system may be implemented without restriction in terms of length. B) Not more than 3 months Enforcement Decree of the Labor Standards Act, Article 28 (Agreed-upon Matters regarding Flexible Work Hours System) (i) The term "other matters prescribed by President" in Article 51 (2) 4 of the Act means the effective term of a written agreement. (ii) The Minister of Employment and Labor may, if necessary for requiring an employer to take measures for keeping the level of wages under Article 51 (4) of the Act, order the employer to submit the details of such measures or conduct an inspection thereof by himself/herself. Description: The term "flexible working hour system of not more than 3 months" refers to a system where a certain adjustment period within 3 months is prescribed, and, in a state where the average working hours per week during the period do not exceed 40 hours, the company causes its employees to work 8 hours on a specific day and work in excess of 40 hours in a specific week. In the foregoing case, the company is not required to pay extra wage for the extended work performed in excess of 8 hours or in excess of 40 hours. This system is generally implemented in the form of a flexible working hour system of not more than 3 months. This system enables the efficient management of working hours in businesses where the workload changes in a certain cycle, such as the workload increasing at the end of each month. Written agreement with workers representative: A "flexible working hour system of not more than 3 months" is restricting requirements with respect to the point that the target period is longer than a flexible working hour system of not more than 2 weeks, and the company and the workers 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 18

21 representative must reach a written agreement. When this system is introduced and implemented based on a written agreement between labor and management, the company is not required to separately obtain the consent of individual workers. Contents of written agreement with workers: In order to introduce a "flexible working hour system of not more than 3 months", the company and the worker must reach a written agreement with regard to the following matters: (A) Scope of workers subject to this system: Duties and job descriptions that are subject to this system are prescribed, and workers that correspond to such duties and job descriptions will be subject to this system. (B) Unit period: A unit period which averages the working hours of 1 day and the working hours of 1 week are prescribed to be 3 months or less. (C) Working days in a unit period and working hours for each working day: To enable applicable workers to comprehend their work schedule in advance, the adjustment period, and the work days during the adjustment period and the working hours for each working day are clearly prescribed. (D) Effective term: The effective term is prescribed with a written agreement to prevent the abuse of this system. Time restriction: When a "flexible working hour system of not more than 3 months" is introduced, it should be noted that the working hours of a specific week must not exceed 52 hours, and the working hours on a specific day must not exceed 12 hours. (4) Selective working hour system Labor Standards Act, Article 52 (Selective Working Hour System) Where an employer has reached a written agreement on each of the following subparagraphs with of workers representative regarding a worker who is entrusted with the decision as to when to begin and finish work in accordance with rules of employment (including those equivalent to rules of employment), the employer may have workers work in excess of the working hours per week set by paragraph (1) of Article 50, or the working hours per day set by paragraph (2) of Article 50 on the condition that average working hours per week computed on the basis of adjustment period not more than 1 month do not exceed the working hours prescribed in paragraph (1) of Article 50: 1. scope of workers subject to this paragraph (excluding workers between the age of 15 and of 18); 2. adjustment period (a finite period not more than 1 month must be prescribed); 3. total working hours within an adjustment period; 4. starting and finishing time of working hours, if a mandatory work period is in force; 5. starting and finishing time of working hours which are allowed to be selected by workers; and 6. other matters as determined by the President. Description: The term "selective working hour system" refers to a system where workers are allowed to decide the starting time and finishing time of work prescribed in the Employment Handbook, and, by prescribing an adjustment period of not more than 1 month through an agreement with the workers, the workers are allowed to independently decide the starting time and finishing time of work and the working hours of 1 day within the scope of total working hours. In other words, workers may work in excess of the statutory standard workings on a specific day or in a specific week to the extent of not exceeding the average working hours or 40 hours per week during the adjustment period. Because applicable workers are allowed to independently 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 19

22 decide the starting time and finishing time of work and the working hours of 1 day, in addition to being able to improve the work efficiency of professionals and researchers, it is possible to promote the employment of housewives. Provisions in Employment Handbook: In order to introduce a "selective working hour system", the company must foremost prescribe the details of the system in the Employment Handbook. Because the core of the selective working hour system is for workers to independently decide their starting time and finishing time of work, rules need to be specified in order to ensure the system. (5) Temporary approval for extending working hours for particular work Permission to extend working hours for particular work up to 8 hours per week Article 53 of the Act was amended to temporarily allow a company to permit workers to extend working hours up to 8 hours per week in addition to the extended working hours pursuant to Article 53 (1) and (2) under the Act; provided, however, that a written express agreement by a worker on certain matters (reasons for extension, working hours, scope of workers) is necessary. This is an exceptional application only for a company with less than 30 workers at all times and the Article will be applied only for a limited period from July 1,2021 to December 31,2022. This Article will not be applied to workers older than 15 but under 18. (6) Recess period and holidays Recess hours per day A company must allow, during the working hours, a recess period of more than 30 minutes when the working hours of a worker are 4 hours, and a recess period of more than 1 hour when the working hours of a worker are 8 hours. A recess period may be freely used by workers, and recess hours are not included in the working hours. Holiday per week A company must allow a worker on average 1 or more paid holidays per week. Guaranteed payment for work on holidays designated by the President Decree The revised Act 2018 clearly stipulates that companies, as applicable under the Act, must guarantee payment for workers for all holidays designated by the President Decree. By this revision, workers at small to medium-sized companies without such paid holiday protection under the collective agreement or employment handbook will receive benefit. There will be a considerable advantage especially for the workers who once have been forced to take unpaid leave to have off on holiday; however, it should be noted that this may be changed with written approval by a labor representative. The provision will be enforced gradually in two years starting from (7)Annual paid leave A company must grant at least 15 days per year of annual paid leave to workers who have work for 80% or more of the prescribed working hours in 1 year. The number of days of annual paid leave is incremented by 1 day every 2 years of service (maximum of 25 days). When a company takes the following measures for urging a worker to use his/her annual paid leave but the worker still does not take the leave, the company is exempted from its obligation to compensate the 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 20

23 worker for any unused leave: (i) the company notifies each worker of the number of his/her unused leave days within the first 10 days of the 6 months before the termination of the period that the annual paid leave can be taken (1 year after being granted), and urges the worker in writing to decide when he/she will use the leave and inform the company of the decided leave period; and (ii) despite the foregoing urging, the worker fails to decide when he/she will use the whole or a part of the unused leave and inform the company of the decided leave period within 10 days after receiving the notice, and the company decides when the worker is to use the unused leave and notifies the worker of the decided leave period in writing at least 2 months before the termination of the period that the annual paid leave can be taken. 4. Overview of wage system (bonus, retirement benefit, overtime payment) and other legal systems in Korea 21

24 5. Method and points to consider regarding ordinary dismissal, punitive dismissal, and dismissal on grounds of reorganization in Korea 5-1. Restriction on dismissal No employer shall dismiss, lay off, suspend, or transfer a worker, or reduce wages, or take other punitive measures against a worker without justifiable reasons. Certain restrictions on dismissal are prescribed under the Labor Standards Act with respect to a company unilaterally declaring its intent and terminating the labor contract against the will of the worker. The Labor Standards Act prescribes that a company must not take punitive measures, such as dismissal, without "justifiable reason", and specifies that there must be "justifiable reason" in order for a company to take punitive measures against or dismiss a worker. While the "justifiable reasons" of dismissal are not specified in the Act, they are classified into cases that are attributable to the worker, such as the worker s willful intent, gross negligence or inefficiency in light of social standards, and cases that are attributable to the company, such as inevitable personnel cuts due to managerial reasons. (1) Dismissal for personal reasons of workers (ordinary dismissal) A company must not dismiss a worker without justifiable reason. Among the "justifiable reasons" for dismissing a worker, when a worker is responsible to an extent where the labor contract can no longer be maintained and such provision is provided in the labor contract or the Employment Handbook, if the dismissal of that worker is reasonably acknowledged in light of social standards without violating the Labor Standards Act, and it will be deemed to be a dismissal with justifiable reason. E.g.) Inferior work behavior, illegal act, resume fraud, etc. If a worker refuses a lawful job-related order by the company, such refusal could be used as grounds for punitive measures. However, it should be noted that if such job-related order is not valid within the scope of the labor contract, then any 5. Method and points to consider regarding ordinary dismissal, punitive dismissal, and dismissal on grounds of reorganization in Korea 22

25 punitive measures taken against that worker will be deemed wrongful. (i) Because the authority to order job transfers generally belongs to the company, reasonable discretion is acknowledged, but if the order of job transfer is in violation of the Labor Standards Act or corresponds to the abuse of authority, the lawfulness of such order is denied. For an order of job transfer to be deemed lawful, procedures required under the principle of faith and trust must be taken in consideration of the necessity in terms of business, comparison with the disadvantages that will be suffered by the worker in his/her living standards due to the job transfer, and discussions with the trade union or the worker. (ii) While extended work may be performed upon reaching an agreement with the worker (Labor Standards Act, Article 53), it is also possible to reach a collective agreement to the extent that the individual contracts (labor contracts) with the respective workers and the rights of agreement of the respective workers are not restricted. Nevertheless, if there is no kind of agreement, the company must not take disciplinary action against a worker who refused to perform extended work, or, even if an agreement had been reached when the worker initially joined the company, if the company demands the worker to perform extended work beyond the initially anticipated scope, the worker may lawfully refuse such demand. (iii) If a worker who engaged in an illegal activity refuses to submit a written apology, such refusal in itself corresponds to the refusal of a lawful job-related order by the company, and may separately constitute grounds for disciplinary action. Nevertheless, it would not be lawful for a company to demand a written apology or note in breach of the worker s freedom of conscience (e.g.: in cases where the worker is deeply regretting his/her action, the company causes that worker to pledge that he/she will accept any form of punishment if any similar action is taken again in the future), and, even if the worker refuses such damage, it will not constitute grounds for disciplinary action. (2) Punitive dismissal Punitive dismissal in Korea closely resembles the punitive dismissal system of Japan, and no significant difference can be observed. Punitive measures may be taken when a worker engages in an extremely malicious disciplinary offense or misconduct, and the requirements thereof need to be specifically prescribed in the Employment Handbook or the labor contract to enable the company to take such punitive measures. In the case of punitive dismissal, the dismissal notice required in other dismissal procedures is not required. (3) Dismissal for managerial reasons (dismissal on grounds of reorganization) In order for a dismissal for managerial reasons to be lawful, all of the following matters must be satisfied: (i) there are urgent managerial needs to reduce personnel in relation to acquisition or merger at the time of dismissal; (ii) the company made every effort to avoid dismissal; (iii) the company has established rational standards and fair criteria upon selecting workers to be dismissed, and has fairly applied the same; provided, however, that, in establishing and applying the foregoing standards and criteria, the company must given consideration to the disadvantage that will be suffered by the worker, such as difficulty of re-employment and impact on living standards; and (iv) the company has explained the necessity of dismissal, its efforts to avoid dismissal, and standards and criteria upon selecting workers to be dismissed, upon presenting specific supporting materials, to workers to be dismissed (if such workers belong to a trade union, then including the trade union), a trade union, in cases where there is such a trade union which is composed 5. Method and points to consider regarding ordinary dismissal, punitive dismissal, and dismissal on grounds of reorganization in Korea 23

26 of a majority of the workers, and to the representative presenting a majority of the workers if there is no such trade union which is composed of a majority of the workers (foregoing workers and trade unions are hereinafter collectively referred to as the "workers, etc."), and exerted efforts to discuss the issue with the workers, etc. Meanwhile, when dismissing a worker on grounds of reorganization in Japan, the following 4 requirements must be satisfied based on a judicially created doctrine: (i) necessity in terms of business; (ii) rationality of selection standards; (iii) performance of duty of explanation to unions and workers; and (iv) performance of duty to avoid dismissal. It can be understood that Japan basically adopts the same standards as the 4 requirements prescribed under the Korean Labor Standards Act described above. (4) Dismissal notice When a company is to dismiss a worker (including dismissal for managerial reasons), the company is required to give notice at least 30 days in advance. When a company fails to give a dismissal notice, the company is required to pay more than 30 days worth of standard wages to the worker. However, this excludes cases corresponding to the reasons prescribed in the Labor Department order as cases where the continuation of business becomes impossible due to calamities or other inevitable reasons, or cases where the worker willingly causes serious obstruction to the company s business or causes serious property damage to the company. (5) Remedies against wrongful dismissal If a company wrongfully dismisses a worker without justifiable reason, he/she may apply for relief with the Labor Commission. This application must be filed within 3 months from the day of unfair dismissal. When the Labor Commission receives the submission of evidence from related parties and questions the relevant parties and acknowledges that the dismissal was unfair, a relief order is issued against the company. If the worker does not wish to be reinstated to his/her current position, the Labor Commission may also issue a monetary compensation order in an amount that is not less than the amount of wages during that period. 5. Method and points to consider regarding ordinary dismissal, punitive dismissal, and dismissal on grounds of reorganization in Korea 24

27 6. Types of foreigner visas (passes) and acquisition requirements Types of visas As visas that permit foreigners, including Japanese nationals, to work in Korea, there are, for instance, Supervisor (D-7), Corporate investor (D-8), Working holiday (H-1), Professional employment (E-5), Technical instructor (E-4), Entertainer (E-6), and Vessel crew (E-10). Among the above, the visas that are generally acquired by Japanese companies upon making inroads to Korea or by Japanese nationals upon starting a business in Korea are the following two types; specifically, Supervisor (D-7) and Corporate investor (D-8). When a Japanese national is to stay in Korea for a period that does not exceed 90 days for the purpose of sightseeing, transit, simple visits, short-term business engagements, or participation in meetings, he/she is not required to acquire a VISA. However, even in cases where the period of stay does not exceed 90 days, any person wishing to enter Korea for short-term employment activities or commercial activities for the purpose of gaining profits through temporary performance, advertisement, fashion modeling, lecture, seminar, research or technical instruction is required to acquire the VISA of Short-term employment (C-4) or the like. As indicated below, Supervisor (D-7) and Corporate investor (D-8) are the visas that are mainly used by transferees. 6. Types of foreigner visas (passes) and acquisition requirements 25

28 6. Types of foreigner visas (passes) and acquisition requirements 26