Mr. Lim, president of company A, a small ice cream manufacturer, is worried as summer approaches. Every July and August, the company receives so many orders that its employees have to work overtime. However, in October when there are only a few orders, all too often most employees sit idle with no work to do until they go home. Last year he suffered too high labor costs in July and August because he had to spend too much money to pay for employees’ overtime work. He even had to consider job cuts due to a sharp drop in orders in October, which caused unease in industrial relations. Is there any way to solve his problem?
There are many companies which, like company A, are concerned about sharp changes in their workload as their workload grows in one particular season but falls in another. During their peak seasons, these companies have to give additional pay to workers who are inevitably asked to do overtime and night work. However, even when their workload is low, they have to pay workers the same amount as usual, which is quite cost-ineffective. This phenomenon could cause anxiety not only for employers but also among workers who face job cuts every off-season due to business deterioration. If so, is there any way to cope with such situation? That is why the Labor Standards Act stipulates the flexible working hours system as part of flexible work arrangements. The system will also solve president Lim’s dilemma described above.
What is flexible working hours system?
To put it simply, the flexible working hours system (averaging work system) is a system that allows working hours to be extended in busy times but reduced in slack times so that the average working hours over a given period conform to the statutory working hours.
For example, company A can choose each three-month period, namely, May/June/July and August/September/October, as a reference period, and increase working hours over the reference period from May to July but reduce them as much during the subsequent three months. In this case, it does not need to pay overtime allowances in July and August while workers can enjoy more free time in May and October thanks to working hour reduction.
What conditions should be met to introduce flexible working hours system?
To introduce the flexible working hours system, a workplace should meet certain conditions. The first condition is to reach a consensus with workers. According to the Labor Standards Act, if an employer is to introduce a flexible working hours system under which working hours are averaged over a reference period of up to two weeks, he/she should establish relevant employment rules or any other equivalent. And if an employer is to introduce a system which allows working hours to be averaged over a reference period of up to three months, he/she should make a written agreement with the representative of workers. Accordingly, in the case of company A, the employer should conclude an agreement in writing with workers before introducing a flexible working hours system with a reference period of three months.
An employer should make such agreement with the representative of workers. If there is a trade union composed of a majority of workers, the trade union, or if there is no such trade union, the person representing a majority of workers becomes the representative of workers. If a labor-management council has been set up, its workers’ member can be considered the person representing a majority of workers.
The written agreement should contain (1) the scope of workers subject to the flexible working hours system, (2) the reference period, (3) the number of work days and the number of working hours for each day, and (4) the effective period of the agreement.
Flexible application of flexible working hours system
The flexible working hours system should not necessarily apply to all workers. So its application can be limited to workers in particular businesses, industries and occupations. For example, company A can apply the system only to production workers, excluding clerical ones. And the effective period of the written agreement can be adjusted according to business conditions since there is no related restriction. Automatic renewal or extension provisions can be adopted to cope with the expiration of the effective period.
However, it should be noted that even under the flexible working hours system, the total number of working hours must not exceed 52 hours a week and 12 hours a day. If working hours exceed these limits, the excess hours of work will be considered overtime work, thus the employer should pay overtime allowances even if he/she implements the flexible working hours system.
Need for cooperation and consensus between labor and management
The condition which is most important and difficult to meet to introduce the flexible working hours system would be to seek cooperation and understanding between labor and management. If an employer and workers reach a consensus on the introduction of the system and cooperate with each other, there will be no problem. But sometimes an attempt to introduce the system meets with opposition from the trade union or workers.
When a workplace introduces the flexible working hours system, designing the system to ensure its efficient operation is important, but the most important thing is the creation of consensus and cooperation between labor and management. Therefore, if an employer intends to introduce the flexible working hours system, he/she should seek understanding and cooperation from workers and actively pursue consultation with the representative of workers in advance.
If company A mentioned above implements the flexible working hours system, its workers may complain that they do not receive overtime allowances to a certain extent. For this reason, it is crucial to make workers aware of the inefficiency of the current work arrangement, and business problems caused by it and persuade them to share the desperate need to introduce the flexible working hours system. The company should also consider ways to induce cooperation from workers, for instance, by promising to expand welfare benefits and ensure employment security if the implementation of the system results in lower wages.
Flexible working hours system, win-win for both employers and workers
The flexible working hours system is a useful system that can create a win-win situation for both labor and management if it is based on labor-management cooperation. The flexible working hours system, if properly applied, would enable employers to flexibly adjust working hours according to changes in production volumes, thereby increasing productivity and improving the business environment. Especially in order to adapt to a rapidly changing business environment these days, employers should actively use the system. In addition, by reducing working hours and increasing holidays, the system would give workers the opportunity to strike a balance between work and family life.
The government has recently submitted an amendment to the Labor Standards Act to the National Assembly. The amendment takes account of cases where a workload cycle is longer than two weeks and where workload changes take place quarterly due to seasonal factors, as happens in company A. It would extend the reference period of the flexible working hours system from the current two weeks and three months to one month and one year, respectively. The amendment seems to take some time before it is passed, but once passed, it is expected to promote the use of the flexible working hours system.