Discussion on Working Hour Reductions

The 40-hour work week was gradually implemented in Korea, beginning in 2003 with social consensus building up on the needs to improve the quality of life for employees. After many discussions between labor and management, the 40-hour work week was introduced without any decrease in wages. However, monthly paid leave and paid menstrual leave were abolished, with companies encouraging the use of annual leave instead.

Since 2009, the MOEL has been working to reduce working hours further, and has recently announced plans to include holiday work in ‘extended working hours’ and reduce the number of sectors where exceptions apply, introduce flexible working hours, improve labor inspections, and increase the availability of part-time employment.

Taking the government’s opinion that the broad exemptions to the working hour rules are the key reasons for the widespread long working hour practice in Korea, the Korea Tripartite Commission formed the Committee on Improvement of Working Hours for Exempted Industries and started a discussion on how to revise the list of sectors where exceptions are permitted, and set limits on overtime from August, 2011.

During the discussion, business groups strongly opposed scaling down the exemptions from the statutory limits and setting a cap on overtime. Even though labor, business and the government could not reach an agreement, the government decided to submit a proposal to the National Assembly in June towards amending the related labor laws in accordance with the public-interest members’ suggestion.

According to these suggestions, the government has divided the current 12 exempted sectors into 26 sectors. Of these, 16 sectors are removed from the exempted list, including financial services as well as hotels and other forms of accommodation. Then in March 2012, the Committee on Reduction of Actual Working Hours will be set up to reduce working hours by reforming the related laws.

The Ministry of Employment & Labor will also monitor workplaces with more than 100 employees and conduct comprehensive investigations on primary companies, such as steel manufacturers with more than 500 employees, and partner firms in both the first and second halves of each year. The government will especially focus on IT companies, hospitals, hotels and mega-supermarkets to ensure compliance with working hour limits, as these companies commonly operate around the clock.

The government plans for reducing working hours are likely to become increasingly burdensome for companies and cause more disputes between labor and management in workplaces.

First, including hours worked on holidays and weekends when calculating legally permitted overtime would likely lead to forced shorter working hours. Such a sudden restriction on working hours will decrease the competitiveness of the manufacturing industry by taking away a basic method of securing labor flexibility in the workplace. For example, large companies in the automotive and shipbuilding industries have made huge investments in facilities, and need to adjust the amount of their production according to the business conditions by managing their investment in their labor force.

The government is attempting to regulate working hours on holidays and weekends with the aim of creating more jobs to make up for the shortened working hours. This takes us to the second problem: when labor inflexibility is considered, it is hardly likely that companies will hire enough employees to make up the gap created by the reduced working hours. Further, jobs ‘created’ by reducing the working hours of other employees would likely be lost during economic recessions. Accordingly, reducing working hours cannot be a fundamental solution to the increasing unemployment. Rather, in the long run, shorter working hours may have a negative impact on employment.

Third, the Ministry of Employment & Labor sees the practice of working long hours as being the primary reason for low labor productivity in Korea and expects that shorter working hours will improve our labor productivity; however, such expectations do not reflect the reality. The reverse is true: companies cannot reduce their working hours due to Korea’s lower labor productivity when compared to other advanced nations. Despite this productivity, Korea has become the world’s 12^th largest economy by working longer hours. It seems unreasonable to expect higher productivity by shortening the working hours.

Fourth, trade unions demand shorter working hours without wage cuts, something which most companies cannot afford to do. The resulting conflict will likely worsen labor relations. Regulation of hours worked on holidays and weekends might bring employee incomes down by one-third of what they are currently being paid, something which greatly concerns workers. While workers may accept wage cuts in order to keep their jobs, one would be hard-pressed to find another nation where workers accept a wage cut in return for more jobs for others. Many of the workers hired through these working hour reductions would likely be redundant in today’s economic recession and this would also be a major cause of labor disputes.

Recently, various political groups have been presenting their own measures on long working hours. The ruling Saenuri (“New Frontier”) Party, which recently changed its name from the Grand National Party, has been considering various economic policies which focus on low-income groups. Generally, regulation of working hours is considered a campaign promise of progressive parties; however, the conservative ruling Saenuri Party is trying to connect the issue of working hours with job creation and social welfare ahead of  the upcoming general elections. Among the campaign pledges of the ruling Saenuri Party, somewhat radical measures to prohibit night work are also included.

The main opposition Democratic United Party (DUP) plans to aggressively promote pro-working class policies under the 3 key election slogans which are: economic democratization, universal welfare and tax increases for the rich. In particular, the DUP announced that it intended to bring national annual working hours down to below 2,000 by 2017 and 1,800 by 2020 as well as introducing a youth employment quota system. During a parliamentary inquiry, the DUP blamed work done on holidays and weekends as the key reason for long working hours in Korea, and DUP chairperson Han Myeong-sook and the new leadership proposed a 35-hour workweek rule into law by accepting the FKTU’s demand to reduce working hours.

Labor groups seem to welcome the move to reduce working hours; however, there is concern over the income which would be lost as a result of working hour reduction. The KCTU and FKTU positions on this decline in income have subtle differences. The KCTU insists that lost income is unacceptable, while the FKTU says that labor and management need to share some of the pain together.

① Include working hours during weekends or holidays in the calculation of the 12-hour overtime limit ② Improve the shift system – Reform the two-group, two-shift system – Provide more support if jobs are created or the current level of employment is maintained after changing the shift system ③ Reduce the range of exempted sectors to the work-hour rules and place limits on extended work ④ Eliminate the rule to exempt surveillance & intermittent workers from the application of the work-hours limit

① Shorten the annual working hours to less than 1,800 by 2017 (in the next five years) ② Develop a plan to reduce working hours in the Committee on Reduction of Actual Working Hours composed of labor, management and the government ③ Set up an industry-level Committee on Reduction of Actual Working Hours and encourage an agreement on working hours. ④ Set a limit on working hours (52 per week, 1,800 per year) and protect the right to rest for workers ⑤ Shorter working hours without a decline in living standards (ban on the inclusive wage system ) ⑥ Set up a fund to protect workers’ income

Unlike the government which is trying to revise the labor law related to work on holidays and weekends, labor groups prefer a modification of the administrative interpretation than revision of the actual law. With an eye to including weekend and holiday working hours when calculating the 12-hour overtime limit, labor suggests that it is easier and quicker to modify the current administrative interpretation than revising the Labor Standards Act itself. From this labor groups seem to believe that changing the administrative interpretation is more favorable to their position.

We employers will try our best to respond to the government’s measures for shorter working hours. In the short run, employers will resist any regulative policies and legislations from being enacted, and in the mid- to long-run, we will increase labor flexibility through the efficient use of working hours.