The new Korean administration has pinpointed “reducing excessively long working hours” and “eliminating unpaid labor” as key items on its national agenda for labor and employment. President Lee Jae-myung has consistently identified the comprehensive wage system as a primary cause of both excessive working hours and unpaid labor. In alignment with this key policy stance, we expect the new administration to initiate substantive discussions aimed at banning the comprehensive wage system soon.
1. |
Basis and Requirements of the Comprehensive Wage System |
2. |
Legislative Developments on the Prohibition of the Comprehensive Wage System |
Classification |
Bill A (Proposed by Park Hae-Cheol) |
Bill B (Proposed by Park Hong-Bae) |
Bill C (Proposed by Park Joo-min) |
Bills D and E (Proposed by Lee Yong-Woo, Chung Hye-Kyung, respectively) |
Scope of Prohibition of Comprehensive Wage Agreements |
Agreements calculated in advance, including overtime, night shift, and holiday work allowances |
Fixed Wage System[1] / Fixed Allowance System[2] |
Fixed Wage System / Fixed Allowance System / Agreements that pay a fixed amount regardless of actual working hours |
Fixed Wage System / Fixed Allowance System (including unused annual leave allowance) / Agreements that pay a fixed amount regardless of actual working hours |
Scope of Measurement and Recording of Working Hours |
Recording of working hours, including the start time, end time, and break periods (on a daily, weekly, or monthly basis) |
Addition of actual working days and actual working hours to the payroll ledger |
Recording of working hours, including the start time and end time (on a daily, weekly, or monthly basis) |
Recording of working hours, including the start time and end time (on a daily, weekly, or monthly basis) |
3. |
Practical Considerations for Employers |
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Whether widely used fixed overtime arrangements will be included in the scope of the prohibition on comprehensive wage agreements.
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Whether the prohibition will apply retroactively to agreements executed before the amendments take effect.
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Whether the amendments will prohibit lowering existing wage levels or impose an obligation on employers to provide measures for wage preservation.
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Whether penalty provisions for non-compliance will be introduced.
These proposed amendments to the LSA closely align with the new administration’s priorities, particularly with regard to addressing excessive working hours and strengthening employee rights. Notably, the amendments provide greater clarity regarding the practical implementation of the prohibition on the comprehensive wage system. Additionally, since the amendments to the LSA introduce stricter requirements for measuring and recording working hours, robust and transparent management of working hours will become increasingly important, regardless of whether or not the comprehensive wage system is banned. Therefore, employers are strongly encouraged to proactively review their current practices and prepare for potential changes to ensure ongoing compliance and mitigate legal risks.
[1] A wage system in which the total amount of the base salary and statutory allowances is paid as a monthly or daily wage without separately specifying the base salary.
[2] A wage system in which a base salary is specified separately, but the total amount of individual statutory allowances is paid as a fixed amount regardless of the actual number of working hours.