On 40 hour workweek of Korea

Korea began to adopt 40 hour workweek from July 1st, 2004 based on the revised Labor Standards Act (LSA). The revised law, in order to alleviate possible increase in cost for employer, determined a gradual schedule for implementation of 40 hour workweek depending on the size of companies rather than applying the system to every company at the same time.   
According to the schedule, companies with 1,000 or more employees were the first to adopt the system. Since then, the system gradually applied to smaller companies every year. This year, companies with 20 or more workers should adopt the system from July 1st. Companies with less than 20 employees should introduce the system at an appropriate time until 2011. The specific date for companies with less than 20 workers has yet to be decided.   
 
40 hour workweek not only reduces working hours but also brings changes in arrangement of leave and overtime pays.

1. Reduction of working hours   
 
Before the revision of the LSA, legal working hours was 8 hours a day and 44 hours a week. With the new system, it is 8 hours a day and 40 hours a week.  What does the legal working hours mean? In terms of cost, it simply means that any work done outside legal working hours should be compensated as overtime work.   
 
2. Overtime   
 
Maximum overtime hours   
 
With an exception of some industries such as transportation, sale, telecommunication, research, advertising and etc, maximum overtime hours per week is 12 hours. For overtime, an employer should pay an employee 150% of ordinary wage. Ordinary wage, one of the complicated concepts for both Korean and foreign employers, can be roughly understood as wage including base pay and fixed allowances.   

Compensation time-off   
 
Under 40 hour workweek, workers can use leave instead of receiving overtime pay. This is almost the same as compensation time off in the United States except that time of leave (or time-off) should match the rate of overtime pay.  While compensation time-off of the US allows 1 hour of time off to a worker for one hour of overtime, the Korean system requires one-and-half hour of time off for one hour of overtime.   
 
3. Annual leave   
 
Number of days of leave   
 
Under the 44 hour workweek, workers had two kinds of leave, namely monthly leave and annual leave. One day of monthly leave was given for one month of work, and 10 days of annual leave were given to a worker after he completed one year of work. There was also 1 day of additional leave for every year starting from the third year of continued service. There was no limit to the number of days of annual leave that increased as workers continued to work.   
 
With 40 hour workweek, a worker can have 15 days of annual leave from the second year on the condition that he worked 80 percent of working days of the first year. Starting from the fourth year, one day is added to the 15 days of leave. Since then, one day of leave is added to the annual leave every two years. The maximum number of days of annual leave is 25.   
 
The new working hour system abolished monthly leave. As a result, a worker in his first year of service may not have any leave. To solve this problem, the LSA stipulated that 1 day of leave should be given for every month as long as a worker worked a full month. Such leave used in the first year should be subtracted from 15 days of annual leave that take place in the second year.   
 
Compensation for unused annual leave    
 
This is one of the problems that foreign employers who just started doing business in Korea often complain about. Once a worker is entitled to annual leave based on his work of the previous year, he can use the leave for a one-year period. What happens if he did not use up all his annual leave? An employer should make a monetary compensation for the unused leave at the first day of the third year. However, there is no mention about this compensation in the text of the Labor Standards Act. The compensation is based on court rulings and labor ministry’s guidelines. Though foreign employers complain that they find no explicit regulation on such compensation in the labor law, this compensation has been a fixed practice.  
 
The revised LSA offers a solution of this problem for employers. If an employer gives notice to a worker about three months before the expiry of annual leave, which would be usually the end of every year, he doesn’t have to compensate for the unused leave.  
 
Menstruation leave   
 
Under 44 hour workweek, a female worker had one day of paid menstruation leave for every month. The new system retained the leave but made it unpaid leave.  
 
 
4. Amendment of the rules of employment     
 
Rules of employment (ROE) are mandatory documents to be made by an employer to specify working conditions of workers. Major contents of rules of employment are wage, working hours, leave, discipline, benefits and other working conditions. Any company with 10 or more employees is required by the LSA to make rules of employment. When it has made rules of employment, the company should submit the ROE to the Ministry of Labor with a written opinion of majority of workers.  
 
The LSA says that when a company introduces 40 hour workweek, it should amend the ROE in line with changes resulting from the new system and submit the ROE along with written opinion of majority of workers to the Ministry of Labor. Incidentally, if working conditions stated in the ROE are more unfavorable to workers than previous ones, written consents, not opinions, of workers are required.

The Ministry of Labor had stated its position that if 40 hour workweek was adopted with no changes made to the conditions stated in the LSA, such introduction of the new system cannot be deemed unfavorable change of working condition. In that case, written opinions of workers are sufficient. As for companies with a labor union, they should amend a collective agreement through collective bargaining to apply 40 hour workweek to union members.