Top 10 Changes in Labor Law
The New Year has dawned. As we cannot put new wine in old bottles, new management strategies should reflect the new laws and regulations that will be introduced in 2011. With this new beginning, Labor InFocus is investigating the changes in labor laws and regulations for CEOs in foreign-invested companies to support their planning of creative and substantial management.
Individual Labor relations
The hourly minimum wage is raised by 210 Korean Won to 4,320 Korean Won, from January 1st, 2011. From July 1st, the 40-hour work week requirement is newly applied to workplaces with from 5 to 19 employees (Article 2 of the Supplementary Provision, Enforcement Ordinance of Labor Standards Act). The law on the childcare leave benefit has also been changed, so that workers will be paid 40% of ordinary wages (maximum of 1 million and minimum of 0.5 million Korean won), instead of a fixed amount (Article 95 of Enforcement Ordinance of Employment Insurance Act). Note that retirement benefit system is applied to workplaces with four employees or less as of December 1st, 2010 (Clause 2 of Article 8, Retirement Pay Act).
Allowing of multiple-union system and procedure for single bargaining channels
The most important issue in 2011 is the multiple-unions system to be implemented from July 1st (Clause 1 of Article 7 of Supplementary Provision, Trade Union and Labor Relations Conciliation Act). Companies should focus on the change in bargaining procedure. A new procedure for unification of bargaining channels with a bargaining representative will be introduced (Clause 6 of Section 2, Article 29 of Trade Union Act). However, unification of bargaining channels among multiple unions at some workplaces with multiple unions already existing, as of December 31, 2009, will apply from July 1, 2012.
Workplaces that were exempted from implementing the Time-off System based on the provisional regulation (Article 3, Supplementary Provision of Trade Union Act) in the second half of 2010 should prepare for the Time-off System with the new collective bargaining (Clause 4, Article 24 of Trade Union Act). The system has been rapidly established in many workplaces within 6 months of its enforcement from July 1st, 2010, and the proportion of companies at which it has been introduced is now 86.5%.
Social insurance
The National Health Insurance Act has been implemented from January 1st, 2011, for unified collection of the four social insurance premiums (national pension, health insurance, employment insurance and industrial accident insurance). With the new collection system, the employment and industrial accident insurance payment systems are also changed from self-assessment (yearly payment) to insurance notification (monthly payment). Premium calculations for employment and industrial accident insurances have also been changed, from wage basis to remuneration basis. The method to calculate premiums of the four social insurances is now unified, bringing efficiency and reduction in administrative costs through unification of the previously separated four social insurances (Clause 3, Article 2 and Clause 1, Article 16-2 of Collection of Employment Insurance and Industrial Accident Insurance Premiums Act).
Taxpayers should also note a change in their year-end tax adjustment, due to amendment of the Limited Exceptions to Tax Laws Act. Foreign workers were in the past able to choose between getting a tax exemption of 30% of their total wages, or a single 15% tax rate levied on their total income. The new tax system allows only the 15% single tax on total income from January 1st, 2011 (Clause 1, Article 18-2, Limited Exceptions to Tax Laws Act) foreign workers, meanwhile, were previously exempted from income tax for 5 years, but under the new act are allowed a 50% reduction in tax amount for two years (Article 18, Limited Exceptions to Tax Laws Act). These changes require greater caution and attention to their year-end tax adjustment by foreign workers.