Amendments to the Labor Standards Act (LSA) were passed by the Korean National Assembly on 28 February 2018. The new law aims at improving work-life balance through changes to working hours, public holidays, overtime and annual leave. Some provisions of the new law took effect with its promulgation on 20 March 2018, and others will apply from 2018 to 2022.
Background
It took the South Korea government four years to finally agree on the provisions of the new law due to opposition from private-sector businesses. Workers in South Korea currently work an average of 400 hours a year more than workers in the United Kingdom and Australia and have some of the longest working hours among the member nations of the Organization for Economic Co-operation and Development. Even though the new law will be costly for employers, it is needed to align South Korea with international standards for working time, increase birth rates and improve productivity.
Key details
New workweek limit
Provisions limiting the workweek will take effect in three stages from 1 July 2018, to 1 July 2021:
1 July 2018, for employers with at least 300 employees.
1 January 2020, for employers with 50 to 299 employees.
1 July 2021, for employers with fewer than 49 employees.
The workweek in South Korea will be redefined as seven days, from Monday to Sunday, and the maximum working hours per week will be reduced from 68 to 52. The 52 hours is comprised of 40 hours of normal worktime and up to 12 hours of overtime.
From 1 July 2021, to 31 December 2022, businesses with fewer than 30 employees can add eight extra working hours to the 52-hour weekly cap, provided they complete a written agreement with employee representatives.
In addition, from 1 September 2018, the number of industries allowed to exceed the 12-hour overtime limit upon agreement with the affected workers will be reduced from 26 to only five. The five exempted industries include marine, postal services, healthcare, air transportation and land transportation. However, exempted employers must allow at least 11 hours of rest between the end of one working day and the beginning of the next.
Overtime pay and holiday work
From 20 March 2018, employees who work eight hours or less during a day off or a holiday are compensated at 150 percent of their ordinary wages. Employees who work more than eight hours during a day off or a holiday are entitled to 200 percent of their ordinary wages.
The new law prospectively addresses the question of compensation for work performed during a day off or holiday, but the South Korean Supreme Court has been asked to decide whether employees were previously entitled to overtime pay when working on a day off or holiday in addition to their regular 40-hour workweek. The court’s decision could require employers to compensate employees who were underpaid for their overtime hours for the past three years (statute of limitation).
Public holidays for the private sector
Prior to the new law, the only statutory paid public holiday for private-sector employees was Labor Day (1 May). However, most employers also recognize the official public-sector paid holidays in their internal company policies or collective bargaining agreements.
Paid public holidays will apply to private sector employees in phases:
1 January 2020, for businesses with more than 300 employees.
1 January 2021, for businesses with 20 to 299 employees.
1 January 2022, for businesses with 5 to 19 employees.
Businesses with fewer than five employees are exempt.
Annual leave
From 29 May 2018, new hires are entitled to 11 days paid annual leave in the first year of employment and 15 days beginning the second year. Prior to this change, the leave that employees took in the first year was deducted from the 15 days of leave available in the second year.
Next steps
Employers should monitor the implementation timelines and update their working hours, overtime, public holiday and annual leave policies in accordance with the new law. Higher employment costs should be expected for businesses that rely heavily on overtime. Employers should also evaluate whether they could be liable for retroactive pay if the South Korean Supreme Court rules overtime pay was required for work performed on days off and holidays prior to the new law’s enactment.
Noncompliance with the new working hours limit and the overtime pay provisions is subject to three years of imprisonment and a fine up to KRW 20 million. Failure to comply with the overtime limit and the public holiday provisions is subject to two years of imprisonment and a fine up to KRW 10 million.