There will be several key changes to Korean labor and employment laws that have already taken effect, or will take effect, in 2019, as explained below:
1. Minimum Wage Increase and Expanded Scope of Minimum Wage Calculation (Article 10(1) of the Minimum Wage Act; Article 5(1) of the Enforcement Decree of the Minimum Wage Act; and the Ministry of Employment and Labor Notice No. 2018-63; effective from January 1, 2019)
The 2019 minimum wage is KRW 8,350 per hour, which represents an approximately 10.9%increase (by KRW 820) from 2018, which was KRW 7,530 per hour.
Bonuses and welfare benefits, which are regularly paid at least once a month, will be partially credited towards the minimum wage calculation starting from January 1, 2019. Specifically, regularly paid bonuses exceeding 25% and welfare benefits exceeding 7% of the 2019 minimum wage per month will be included in the minimum wage calculation. These percentages will be gradually decreased until 2024, at which time they will be fully credited towards the minimum wage calculation.
Further, weekly paid holidays and weekly holiday allowances required by law are included in (i) the “reference wages” and (ii) the number of hours used to calculate the minimum wage. However, contractual and/or agreed-upon paid holidays/days off (e.g., Saturdays) and contractual and/or agreed-upon holiday/day off allowances are excluded from (i) the “reference wages” and (ii) the number of hours used to calculate the minimum wage. Accordingly, the number of hours used to calculate minimum wage is set at 209 hours.
If an employer intends to make changes to the rules of employment so that (i) a wage payment cycle exceeding one month will be changed to (ii) a monthly wage payment cycle, without making any changes to the total wages, the employer must solicit and hear the opinion from any majority labor union or, absent such a labor union, the majority of the employees. In case of any violation of this requirement, the employer will be subject to a criminal fine of up to KRW 5 million. If the collective bargaining agreement needs to be amended accordingly, the employer will be granted up to 6 months to make the necessary changes.
2. Amendment to Labor Standards Act regarding Notice of Dismissal provision (Articles 26 and 35 of Labor Standards Act; promulgated on and effective from January 15, 2019)
Under an amendment to the Labor Standards Act (“LSA”), the exceptions to the advance notice of dismissal requirement – those for probationary employees (on probation periods not exceeding three months), employees hired for a fixed period not exceeding two months, employees hired on a daily basis and who have continuously worked for a period of less than three months, or employees hired for seasonal work for a fixed period not exceeding six months – were deleted from the LSA (Article 35 of the LSA). Instead, the amendment to the LSA inserted a separate exception to the advance notice requirement for employees whose consecutive service period is less than 3 months (i.e., regardless of whether they are probationary employees or not) (Article 26 of the LSA).
Employers are required to amend their rules of employment if the rules of employment include the same terms as those set forth in the previous version of Article 35 of the LSA prior to the amendment discussed above.
3. New Provision entitled “Prohibition of Workplace Harassment” in Labor Standards Act (Article 6-2 of Labor Standards Act; promulgated on January 15, 2019; effective 6 months from date of official promulgation)
An amendment to the LSA established a new obligation to prohibit workplace harassment. Under the amendment, workplace harassment is defined as an act of an employer (or business owner) or employee that causes physical or mental suffering, or worsens the working environment of another employee, by taking advantage of the alleged harasser’s status or relationship within the workplace beyond the appropriate scope of work. The amendment to the LSA also specifies the employer’s obligations to take appropriate measures if workplace harassment occurs.
Accordingly, employers would need to include a provision entitled “Prevention of and Measures to Address Workplace Harassment” in their rules of employment as required by the amendment to the LSA.
For your information, other than specifying the possible criminal punishment for employers that take disadvantageous measures against a victim and/or an employee who reports the occurrence of workplace harassment during an internal investigation (imprisonment for up to three years or a criminal fine of up to KRW 30 million), the amendment provides for no penalties for a violation (e.g., administrative fines).
4. New Requirement to Obtain Concerned Employee’s Confirmation of Employers’ Report of Occupational Accidents (Enforcement Rules of Occupational Safety and Health Act; effective from January 1, 2019)
An employer (or business owner) is required to obtain confirmation from an employee representative of the employer’s report of an occupational accident, which needs to be submitted to the Ministry of Employment and Labor following such an accident. Employers in the construction industry were previously covered by an exception to this confirmation requirement. However, this exception was been deleted as of January 1, 2019 and a new provision, which expands the legal obligation by requiring the employer to obtain the concerned employee’s confirmation of an occupational accident report if there is no employee representative, has been included in the Enforcement Rules of the Occupational Safety and Health Act.
5. Increase in Minimum Funding Contribution to Defined Benefit Retirement Pension Plan (Article 4-2 of Enforcement Rules of Employee Retirement Benefit Security Act; effective from January 1, 2019)
The minimum funding contribution required for the Defined Benefit Retirement Pension Plans increased from 80% to 90% as of January 1, 2019, and will cover the January 1, 2019 to December 31, 2020 time period, and will then increase to 100% from January 1, 2021.
For your information, as a result of the amendment to the Employee Retirement Benefit Security Act of June 12, 2018, an employer is obligated or will be obligated to take measures to prevent reduction of retirement benefits if wages decrease due to the enforcement of the “52-hour workweek” regime. An employer is subject to a criminal fine of up to KRW 5 million in case of a violation of this obligation.
In addition to the key changes noted above, the grace period from enforcement granted to employers with 300 or more employees by the Ministry of Employment and Labor (“MOEL”) regarding the “52-hour workweek” regime – which was 6 months, until the end of 2018 – has been extended by the MOEL until March 31, 2019, in consideration of the on-going discussions concerning changes to the legal requirements for alternative work hour systems (e.g., the extension of the unit period for the Flexible Work Hour System from three months to six months).
