1. Wages

Wages refer to money or other valuables paid to employees in exchange for their labor services, regardless of their titles (wage, salary, bonus, etc.). Wage shall be paid at or above the minimum wage set by the Minister of Employment and Labor every year. In 2015, the minimum wage was set at 5,580 won per hour, and 44,640 won per day (8 hours day). The Labor Standards Act classifies wage into ordinary wage and average wage; retirement payment and other allowances set by law are to be calculated based on one of these two wage categories. Average wage refers to the total wages paid to the worker during the 3 months prior to the event (e.g. retirement) facilitating the calculation of average wage, divided by the total number of days during the same period. Average wage is used to calculate retirement payment, business suspension allowance, and industrial accident compensation. Ordinary wage refers to wages by hour, day, week, or as otherwise outlined in an employment contract for certain work done, or for total working hours. Allowances for extended, night, holiday work, annual paid leave, and advance notice of dismissal fall into this category.

2. Working Hours

The standard working hours set by the Labor Standards Act are 8 hours per day and 40 hours per week. The working hours prescribed by the Act shall not be exceeded. If carried out by order of the employer, work preparation hours, waiting hours, training hours and organizing hours after work are all counted as "working hours."

< Labor hours on each type of workers >

3. Holidays and Leave

The issuance of orders to work past standard working hours shall be agreed upon between the parties. However, even when agreed upon by both parties, at least 50% of ordinary wage shall be paid in addition to standard wages for extended work, nighttime work (22:00-06:00), or holiday work. However, where introducing a flexible working hour system via employment regulations (every 2 weeks) or a written agreement with workers' representatives (every 3 months), or introducing a selective working hour system through a written agreement with workers' representatives, work may be ordered for over 8 hours per day, 40 hours per week for a certain period (2 weeks or 1 month), insofar as the average number of working hours per week does not exceed 40 hours. However, even in such cases, a flexible working hour system cannot be applied to pregnant women or minors.

Generally there are two types of holiday and leave: "Legal" holidays and leaves, for which the details, conditions, and effects are decided by law, and "agreed" holidays, for which such matters are decided autonomously by management and labor. Legal holidays/leaves include weekly holidays, Labor Day, monthly leave, annual leave, menstruation leave, and maternity leave. Agreed holidays/leaves may include public holidays, company foundation anniversaries, summer leave, and congratulatory & condolence leave.

Paid Weekly Holidays

An employer shall give an average of one paid-leave day or more per week, if an employee has worked for the prescribed number of consecutive working days. The weekly holiday does not have to be Sunday. Where an employee works on a weekly holiday, 50/100 of the ordinary wage shall be paid in addition to standard wages for the work on that day.

Annual Paid Leave

An employer shall provide workers, who have come to work for more than 80% of one working year, with 15 days of paid leave. For workers, who have worked for three or more consecutive years, one more day of paid leave shall be provided for every 2 years of consecutive work after the initial year, up to a total of 25 days. Annual leave shall be granted upon the request of a worker, and the worker will be paid ordinary or average wage for the period of leave in accordance with employment regulations. However, the employer may change the time of leave if granting the leave at the requested time would cause a major disruption in business operations. If days of leave expire, as the worker does not take the leaves despite the employer's encouragement, the employer is not obligated to compensate for the unused leave.

Paid Maternity Leave

Pregnant workers shall be given a 90-day protective leave before and after childbirth, with 45 days or more to be allocated after childbirth. Wages for the first 60 days of the leave period shall be the burden of the employer, with the wages of the remaining 30 days are to be paid by employment insurance (the government). In cases of a business eligible for preferential support (Article 15 of the Enforcement Decree of the Employment Insurance Act), the wage for the 90 day period for an employee giving birth to a child on or after January 1, 2006, is entirely paid by the employment insurance.

4. Dismissals

The employer shall not dismiss, temporarily lay off, suspend, transfer a worker, reduce wages, or take punitive measures against him/her without justifiable cause. Such punitive measures shall be taken on reasonable grounds that are generally accepted by society at large. In general, reasons for punitive measures such as dismissals are stipulated in the employment regulations or the collective agreement, and procedures set in the concerned employment regulations or collective agreement shall be followed. When dismissing a worker, the worker shall receive notice of the dismissal at least 30 days prior to the actual dismissal. If not, the employer is obligated to pay more than 30 days' worth of ordinary wage.

5. Retirement Benefits

In order to pay retirement benefits to retiring workers, the employer shall choose either the retirement allowance system or the retirement pension plan. In choosing the retirement benefit scheme or changing the chosen retirement benefit scheme to another type, the employer shall obtain the consent of the majority of the labor union if a labor union consisting of the majority of workers exists, or the majority of workers if a labor union does not exist.

Retirement Allowance System

In the event that a worker retires or dies, the employer shall pay a retirement allowance equivalent to the average 30-day wage, as calculated in the Wages section, for each year of his/her continuous service.

Retirement Pension Plan

To guarantee workers' financial stability after retirement, the employer shall accumulate and invest funds for the retirement allowance into an external financial institution during the workers' service period. Retirement allowance shall be paid to the workers as a pension or in a lump sum.

Types of retirement pension policies

DB: Defined Benefit Retirement Pension

- The retirement benefit is pre-fixed based on the length of service and average wage. The amount of the employer's burden (accumulation) changes according to the investment results of the accumulated funds.

DC: Defined Contribution Retirement Pension

- The worker determines the investment method of the accumulated funds, and the amount of retirement pension changes according to the investment results of the accumulated funds. The employer shall pay 1/12 of the worker's wage into the worker's personal account every year.

6. Labor-Management Council

The labor-management council is a consultative committee created for the purpose of promoting participation and cooperation of all employers and workers to improve the welfare of workers and the sound development of companies. A business or work place with 30 or more workers shall establish a labor-management council that consists of an equal number of representatives from management and labor (3 - 10 people from each side). The labor-management council will handle matters for discussion, resolution, and report depending on the resolution and performance obligations.

7. Social Insurance Policy

Employment Insurance

Employment insurance is a social insurance policy which has been introduced in order to provide livelihood support for unemployed workers, to prevent layoffs due to industrial restructuring, and to promote re-employment, while providing employers with various types of support to strengthen corporate competitiveness. Businesses and work places with one or more regular workers are obligated to subscribe to employment insurance. The employer shall report the creation of an insurance relation to the Korea Workers' Compensation & Welfare Service within 14 days from the date on which the business commenced, and shall report the insured qualification acquisition to the job center at the regional labor office within 14 days. Employers who have subscribed to employment insurance shall pay a premium to the district office of the Korea Workers' Compensation & Welfare Service every month, and report the total amount of wage they paid to their employees in the previous year by end of every February for the calculation of monthly wage and premium in the following year.

* Businesses exempted from mandatory subscription to employment insurance:

Agricultural, forestry, fishery, hunting businesses with less than four regular workers;

Housekeeping services

A construction project whose total construction cost is less than 20 million won ; a construction of a building whose total floor area is less than 100 square meters or a major repair of a building whose total floor area is less than 200 square meters

Industrial Accident Compensation Insurance

Industrial Accident Compensation Insurance is a social insurance policy which requires the government to take responsibility on behalf of employers for compensating workers for injuries or illnesses acquired at work, in accordance with the Labor Standards Act. Accordingly, employers subject to industrial accident compensation insurance are exempted from the individual compensation responsibilities towards workers by paying a premium. The government shall pay direct compensations to the workers from the funds created by employer-paid premiums. Businesses and work places with one or more regular workers are obligated to subscribe to industrial accident compensation insurance. The employer shall report the creation of an insurance relation to the Korea Workers' Compensation & Welfare Service within 14 days from the date on which the business commenced. Employers who have subscribed to industrial accident compensation insurance shall pay a premium to the district office of the Korea Workers' Compensation & Welfare Service every month, and report the total amount of wage they paid to their employees in the previous year by end of every February for the calculation of monthly wage and premium in the following year.

Agricultural, forestry, fishery, hunting businesses with fewer than five regular workers;

A construction project whose total construction cost is less than 20 million won, construction of a building whose total floor area is less than 100 square meters, or a major repair of a building whose total floor area is less than 200 square meters

Agricultural, forestry, fishery, hunting businesses with fewer than five regular workers;

Accident compensation business according to government employees pension act

Accident compensation business according to government employees pension act

  Information sourced from www.investkorea.com