Opinion on the Partial Amendment to the Labor Standards Act

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2003.08.11

No.04

Opinion on the Partial Amendment Bill to the Labor Standards Act

(Regarding the Reduction of Working Hours)

- Proposed by the government on 2002.10.17 -

1. Meaning and Background of the Amendment Bill to the Labor Standards Act

There is no doubt that reducing statutory working hours (the five-day workweek) is the direction our society should pursue going forward. This is a view shared by labor and management alike, as well as by the public as a whole.

As seen in advanced foreign countries, when wage income rises, workers tend to prefer more leisure. From the standpoint of businesses as well, when wage costs rise, management goals are set not toward long working hours but toward improving productivity and enhancing managerial efficiency through equipment automation.

Reflecting this, a broad agreement among labor, management, and government on the overall direction of introducing the five-day workweek was reached at the Tripartite Commission in October 2001. Based on this, the Special Committee on Working Hours sought to draw agreement on specific issues.

The introduction of the five-day workweek has very broad ripple effects not only on workers and businesses, but across the entire national economy, including public institutions and school classes. Therefore, it must be premised on sufficient review and efforts to minimize possible side effects, particularly through a process of gathering the opinions of all economic actors.

From the standpoint of businesses, a five-day workweek does not simply mean reducing statutory working hours to 40 hours. It must be pursued in a way that simultaneously improves the overall working-time system, including the existing holiday and leave systems, so that the system can operate smoothly while enabling the shared growth of labor and management.

2. Problems with the Amendment Bill to the Labor Standards Act

According to the partial amendment bill to the Labor Standards Act submitted by the government to the National Assembly on October 17, 2002, the purpose of the legal amendment is stated as “to contribute to improving workers’ quality of life and strengthening corporate competitiveness by reducing statutory working hours and improving the working-hours and leave system in line with international standards.”

However, this bill not only fails to sufficiently take international standards and practices into account, but is also biased toward the demands of organized labor, raising concerns that it will seriously weaken the competitiveness of Korean businesses facing harsh international competition.

Given domestic and external conditions, the five-day workweek is still premature. Nevertheless, businesses have supported its introduction from a broader, long-term perspective. However, they have repeatedly emphasized that establishing international standards and practices, as in advanced countries already implementing the five-day workweek, is an essential prerequisite. Discussion of quality of life without income as a foundation is nothing more than empty rhetoric; therefore, to raise quality of life to the level of advanced countries, enhancing business competitiveness is, above all, an indispensable condition.

The government’s current bill fundamentally has the following problems.

First, the implementation schedule is far too tight.

The government is trying to mandate the five-day workweek for all businesses with 20 or more employees after a grace period of only four years following the amendment. The example of Japan, which provided a grace period of about 10 years by industry and business size after revising the law, should not be ignored.

Second, there are too many vacation days.

Under the bill, the annual number of leave days and holidays would be 136 to 146 days. It is not possible to maintain business competitiveness while taking more time off than Japan (129 to 139 days), whose per capita income is more than three times higher.

Third, the scope of wage compensation is not clear.

Variable wages such as allowances for the monthly leave and menstrual leave systems, which are being abolished, should be excluded from the scope of wage compensation.

Fourth, the paid weekly holiday system should be made unpaid.

The paid weekly holiday system, which not only violates the principle of no work, no pay but is also rare around the world, should naturally be made unpaid in line with international standards.

Fifth, the overtime premium rate should be lowered to 25%, in line with ILO and Japanese standards.

The current premium rate of 50% not only increases the burden on businesses, but also serves as an incentive to increase overtime work.

Sixth, the realities of small and medium-sized enterprises are not reflected at all.

Not only the implementation schedule, but also various systems such as the flexible working hours system should, of course, take into account the difficulties of SMEs with fragile business conditions.

3. Conclusion

The introduction of the five-day workweek should be pursued in a way that minimizes side effects across the national economy as a whole while simultaneously taking into account workers’ quality of life and business competitiveness.

Beginning on August 8, labor, management, and government were set to resume discussions on the five-day workweek at the National Assembly level. However, despite the discussions over the past three years, the business community is skeptical about the very idea of reopening talks when the gap between labor and management positions on the five-day workweek has still not narrowed.

Although labor and management have repeatedly negotiated several times, they have completely failed to narrow their differences, so renewed discussions are highly likely to result only in delaying legislation. The two major labor federations say they will present a unified proposal, but judging from the recent unified proposal prepared by the Manufacturing Joint Struggle Headquarters, it appears likely to be far removed from the government’s bill. As passage of the legislation continues to be delayed, negotiations over collective bargaining agreements on the five-day workweek at industrial sites, including Hyundai Motor, are becoming a major cause of labor-management disputes. The resulting economic losses are also proving to be very substantial.

Since the five-day workweek is an issue on which agreement is very difficult not only between labor and management but also within business circles and within labor circles, it is now time for the National Assembly to make a prompt decision with reference to the government’s bill.

Jeongtae Kim (Head of the Economic Research Division, Korea Employers Federation)

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Original title: 근로기준법중개정법률안에 대한 의견

Author: Jeong-tae Kim

Date: 2003-08-11

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=bill&pn=4&idx=25822