Effective as of January 1, 2020, the Ministry of Employment and Labor (the “MOEL”) granted companies with 50 or more but fewer than 300 employees a one-year grace period from adopting the 52-Hour Workweek System (the “System”) considering the practical challenges medium-sized companies may face in complying with the System. As this grace period has expired as of the end of 2020, we hereby provide a summary of the key issues to be considered.
First, every member of the business, including officers and department heads, must be aligned in terms of his/her understanding of the System prior to implementation of any plan for reducing working hours. Thus, it is important to ensure that there is a company-wide recognition/agreement on the need to follow the System.
Moreover, there should be a simulation period during which time appropriate measures are implemented/established to ensure compliance with the System. In particular, if a flexible working hour system has been implemented for certain departments based on their business needs, the company must check whether such working hour system (i) was duly adopted by following proper procedures and (ii) complies with the System. Employers should also prepare for potential disputes related to its compliance with the System by (i) establishing appropriate working hour guidelines which comply with the working hours standards under the Labor Standards Act (the “LSA”) and relevant administrative interpretations, and (ii) establishing clear working hour standards
We also note that, the recent amendment to the LSA (the “Amendment”), which became effective from January 5, 2021 in phases depending on the number of employees in the business, allows flexible working hours based on a six-month calculation period, which is an extension from the previous three-month calculation period. Under the new flexible working hour system, employers are no longer required to pre-determine weekly working hours of each work day during the calculation period. Instead, employers may first pre-determine total working hours for each week during the calculation period and notify the employees of daily working hours during the calculation period two weeks in advance. Thus, under the new system, employers are provided with more flexibility in working hours. However, please note that the Amendment also introduced a new obligation – employers are now required to report to the MOEL their plans to preserve/maintain the wage level of employees.
The new flexible working hour system will likely be useful in cases where employees need to work beyond the prescribed working hours limit for a substantial period of time. As such, the pros/cons of the new system should be carefully reviewed prior to its implementation.
Please also note that the Amendment extended the calculation period from one month to three months for selective working hour systems implemented by businesses that handle research and development work for new products or technologies.
