[Editorial] Reforming the Fixed-Term Employment Act Should Aim at “Expanding Employment Flexibility”

It is late, but welcome news that the Presidential Office and the Ministry of Employment and Labor have recently officially acknowledged the problems with the Fixed-Term Act and begun in earnest to reform the system. However, if this reform amounts to nothing more than a simple extension of the maximum period of use or a repetition of forcing conversion to regular employment, it will only repeat past failures.

The Fixed-Term Act has become not a protection law, but an expulsion law. Enacted in 2007, the Fixed-Term Act was introduced with the intention of encouraging regular employment by requiring that non-regular workers employed for more than two years be converted to open-ended contract status. In reality, however, the opposite occurred. To avoid the burden of conversion, companies made a practice of ending contracts before they reached the two-year mark, in what became known as the “1 year 11 month contract.”

The numbers prove it. According to the Korea Labor Institute, the conversion rate of non-regular workers to regular status (the conversion rate after two years) fell from 27.9% in 2009 to 19.4% in 2020. According to the Economically Active Population Survey Supplement by Employment Type from the National Data Portal (as of August 2025), the share of non-regular workers rose by 2.079 million (5.4 percentage points), from 6.481 million (32.8%) in August 2016 to 8.568 million (38.2%) in August 2025, of whom 5.848 million were fixed-term workers and 4.229 million were part-time workers. This is a textbook example of what happens when well-intentioned regulation ignores market realities.

However, extending the maximum period of use alone is not enough. The core of the current discussion is to lengthen the maximum period from two years to three years or more. This is a measure that successive administrations have attempted several times, only to see it repeatedly collapse in the face of labor opposition. Even if such an extension is implemented, companies will simply repeat the same behavior of terminating contracts just before the new deadline. Merely changing the height of the partition cannot eliminate the distortions created by the partition itself. Likewise, calls from some in labor circles to “restrict the grounds for use” will only reduce overall employment and produce new workarounds such as outsourcing and subcontracting.

The fundamental problem in the current labor market is that its dual structure has been created not by fixed-term employment itself, but by excessive protective regulation for regular workers. Once regular workers are hired, dismissal is virtually impossible. This rigidity not only leads companies to avoid hiring regular workers in the first place, but also makes it difficult to hire contract workers with greater employment stability.

The solution lies in expanding the autonomy of employment contracts between labor and management. The restrictions on the period of use for fixed-term employment should be abolished or significantly eased so that companies and workers can freely determine contract duration according to the nature of the work.

The excessive dismissal protection regulations for regular workers should also be adjusted to a reasonable level in order to lower the threshold for hiring. When labor market flexibility increases, companies can hire the personnel they need in a timely manner, and this, paradoxically, leads to both greater overall employment and greater stability.

The principle of equal pay for equal work should be applied in substance so that a compensation system centered not on employment type, but on capability, performance, and job duties, can be firmly established.

Over the past 20 years, forcing conversion to regular employment by law has not reduced non-regular employment. The stronger the regulation, the more evasive practices increased, and the damage fell on non-regular workers. One hopes that reform of the Fixed-Term Act will not end up as yet another stopgap regulatory fix.

Only by expanding the autonomy of employment and breaking down the artificial barriers between regular and non-regular workers can a flexible and stable labor market be realized in which workers and businesses thrive together.

2026. 4. 15.

Center for Free Enterprise (CFE)

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Original title: [논평] 기간제법 개편, '정규직 강제'가 아닌 '고용 자율성 확대'로 가야 한다

Author: Center for Free Enterprise (CFE)

Date: 2026-04-15

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=28805