[Op-Ed] The Fixed-Term Employment Act Brought Job Insecurity and Disruption; Stability and Flexibility Are the Answer

The rule requiring conversion to an open-ended contract after two years of employment affects corporate hiring practices and distorts its intended purpose / A mechanism for job insecurity and disruption, simultaneously reducing productivity and stability in the labor market / Excessive regulations protecting regular workers from dismissal should be adjusted to a reasonable level / A sophisticated system that balances job security with labor market flexibility is needed

Since the government began revising the Fixed-Term Workers Act last April, full-fledged discussions between labor and management have been underway, and major controversy has emerged across the labor market. The Fixed-Term Workers Act, introduced in 2007 with the aim of protecting non-regular workers, has nonetheless been widely assessed as having produced results different from what was intended in the actual labor market. In particular, the key issue is that the current rule requiring conversion to an open-ended contract after two years of employment has had a certain influence on corporate hiring practices and, paradoxically, is distorting the law’s purpose.

Under the current system, some companies have chosen to terminate contracts before the two-year mark in order to avoid the obligation to convert workers to regular status. In this process, employment patterns involving repeated short-term contracts have emerged, and critics point out that this has weakened continuity of employment for workers. At the same time, from the perspective of businesses, concerns have been raised that a structure has formed in which it is difficult to utilize skilled workers over the long term, creating potential inefficiencies in workforce management.

The biggest problem is that what was intended as a “protective measure” is instead functioning as a “mechanism for job insecurity and disruption.” Companies are evading the obligation to convert workers to regular status by ending contracts before the two-year threshold, and as a result, a pattern of repeated “1 year and 11 months contracts” has become entrenched.

As a result, workers lose their jobs before they can accumulate skills, while firms also face inefficiencies because they cannot continue to utilize experienced personnel. In other words, a structural problem has emerged in which workers in the same role are repeatedly replaced, simultaneously reducing both productivity and stability in the labor market.

The Fixed-Term Workers Act has also failed to reduce the overall number of non-regular workers. In fact, the number of fixed-term workers has continued to rise, and the conversion rate to regular status remains very low. This shows that the system has remained a formal regulation disconnected from labor market realities.

At the same time, it is also clear that simply “extending the period” will not solve the problem. As labor groups point out, the abuse of non-regular employment is a structural issue stemming less from the system’s time limit than from the practice of replacing permanent work with temporary positions. Therefore, easing the regulation could instead risk prolonging non-regular employment.

Any extension of the allowable period for using fixed-term workers should not be pursued on its own. Even if the period is extended, safeguards must be introduced together to block “split contracts,” such as limits on the number of contract renewals and bans on repeated use for the same work. Excessive regulations protecting regular workers from dismissal should also be adjusted to a reasonable level. In the current structure, where dismissal is excessively difficult, firms tend to avoid new hiring altogether, which can only work to the disadvantage of young people and new entrants to the labor market.

The Fixed-Term Workers Act is not merely a labor regulation but a core institution that determines the “quality of jobs.” The key is not strengthening or easing regulation in itself, but designing an employment environment that is predictable and sustainable for both workers and businesses. Regulations justified in the name of protection and one-sided deregulation emphasizing flexibility have both revealed their limitations.

Ultimately, the core of reforming the Fixed-Term Workers Act is not the binary choice of whether to maintain or relax regulation, but creating an environment in which labor market participants can make freer choices. What is needed now is a sophisticated system that combines job security and labor market flexibility in a balanced way.

Dahye Choi, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 고용 불안과 단절 불러온 기간제법, 안정성과 유연성이 해법

Author: Da-hye Choi

Date: 2026-06-02

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=1&idx=29100