On December 12, 2022, the Future Labor Market Research Group (the “Group”), a labor policy advisory group launched by the current Administration in July 2022 to develop the government’s labor market policy objectives, issued the first recommendation for a “fair labor market and workers’ freedom and health.” Through this recommendation, the Group identified the working hour system and wage system as matters that would require attention as matters of priority and proposed specific recommendations. In addition, the Group identified additional key issues for stakeholders’ (i.e., experts, labor and management) further discussions.
1. Reforming the Working Hour System
Stressing that the rigid working hour system is no longer suitable for the current labor market, the Group suggested that labor and management should be allowed to choose their working hours at their own discretion in order to improve the efficiency of work and the quality of labor through sufficient rest and leave. Currently, overtime work is managed on a weekly basis and a maximum 12 hours of overtime work per week is allowed. However, the Group recommended that overtime work be managed on a monthly, quarterly, half-yearly or yearly basis to allow labor and management to flexibly choose working hours to meet their needs (i.e., maximum 52 hours/month, 140 hours/quarter, 250 hours/half-year, and 440 hours/year). At the same time, as a way to protect workers’ right to health in light of the introduction of a flexible working hour system, the Group recommended that workers be guaranteed a rest period of 11 consecutive hours between working days and that protective measures for nighttime workers be put in place.
In addition, the Group emphasized that transparent record-keeping of working hours is a prerequisite for the expansion of the flexible working hour system. The Group also strongly recommended that effective labor audits on the comprehensive wage system or fixed overtime allowance system be conducted in order to prevent its misuse or abuse. In addition, the Group recommended that companies introduce a working time savings account system that allows employees to earn paid time off instead of overtime pay for overtime, nighttime, and holiday work they performed and use additional leave as they wish. The Group further recommended that high-income professionals who have broad discretion in managing their working hours be excluded from application of the regulations concerning working hours, rest periods, and holidays.
2. Reforming the Wage System
The Group noted that the seniority-based wage system, which is predominant in large companies, makes it difficult to continue employing middle-aged and elderly workers, to create jobs for younger people, and to reduce the wage gap based on types of employment and thus needs to be shifted to a wage system based on tasks and skills. In particular, it was pointed out that it is necessary to support the establishment of a wage system based on tasks and skills for small and medium-sized companies (the “SME”), expand industry-based social dialogue models to reform the wage system, and establish a wage system by industry so that a fair evaluation and compensation system can be established. To this end, it was recommended that relevant policies be updated to allow for the adjustment of wages and duties of senior workers and clarify the scope of workers who need to consent to changes in the employer’s rules of employment so that a wage system can truly reflect the diversity of different occupational groups.
3. Additional Key Tasks
The Group also proposed additional key tasks to tackle the two-tier labor market, low birth rate and aging population, and technological changes that the labor market is facing. The Group first proposed that the working conditions of non-regular workers should be improved and discrimination against them should be eliminated, and that laws and systems should be improved to narrow the gap in working conditions between principal and subcontracting companies. In order to establish a future-oriented labor law, the Group also called for legislative reforms in response to the diversification of employment types and measures to resolve uncertainties surrounding ordinary wage, average wage, weekly day-off allowance, and minimum wage, which have been increasingly subject to legal disputes.
In addition, the Group also recommended the following proposals to improve laws and systems for the establishment of autonomous and responsible labor-management relations: revising the criminal liability provisions in labor and employment laws, revitalizing the mediation function of the Labor Relations Commission, reconsidering the scope of substitute work allowed during labor disputes, and restricting the occupation of business places by labor unions during labor disputes.
In addition, the Group also called for the establishment of a comprehensive plan to respond to the continuing trend of a labor shortage as well as the establishment of a system to address the rapid changes in the industrial structure due to the advancement of information and digital technologies, and innovation in the labor process.
As explained above, the Group proposed various measures to improve laws and systems in order to resolve the continuous challenges facing the Korean labor and employment market and requested the government to take prompt legislative and administrative measures. However, as many of the recommendations presented by the Group are matters that require legislative action, it is unlikely such recommendations and changes will have an immediate impact on the labor market. Therefore, it will be prudent to monitor what legislative and administrative agendas the government pursues based on the Group’s recommendation and to take the appropriate actions. We will continue to monitor specific legislative and administrative measures for the reform of the labor and employment market and provide further information.
