The employer of Company A has recently heard that some well-known companies have allowed their employees to autonomously set their work arrival and departure times through flexible working hour schemes, in an effort to improve creativity and productivity. The employer is now considering adopting such a system too, as Company A has been struggling from a lack of creativity and constant overtime, mainly caused by the rigid 9-to-6 work hours. Under the Labor Standards Act (LSA), there is a provision for a ‘Selective Work Hour System’, but no provision for a flexible work schedule. Running a flexible working hour system will require careful review of overall procedure such as which system to adopt, how to adopt and run it, and how extended work allowance will fit in the plans.
As companies like Google have adopted flexible working systems and have stood out from the competition, there is a growing interest in such systems. More and more Korean companies are allowing their employees to determine their work schedules rather than sticking to the current rigid working hour system unilaterally set by the company.
According to the LSA in Korea, employees are allowed to determine their work arrival/departure times as well as their total working hours under the ‘Selective Work Hour System’. The procedure to adopt a selective work hour system and its legal ramifications are also stipulated in the LSA. However, flexible work schedules, as frequently referred to in the media, are not mentioned in the law and the term is commonly used to mean selective work hours even though these two systems differ in terms of adoption and legal impact.
Definitions and types of ‘selective work hour systems’ and ‘flexible work schedules’
Regarding selective work hour systems, the LSA states that employees are allowed to decide when to begin and finish work day and how long to work within the statutory working hour limits during certain periods (up to one month) set by written agreement between labor and management. That is, employees can determine their working schedules with no restrictions from the 8-hour work day and 40-hour work week requirements.
In fact, selective work hour systems can be run in a variety of ways depending on company situation, including: 1) employees can decide working days and work arrival/departure times (e.g. 10-hours a day from Monday to Thursday & Friday off); 2) employees can decide work arrival and departure times (e.g. at least 4 hours a day from Monday to Friday); and 3) employees can decide arrival and departure times, but are required to be present during ‘core’ times (e.g. start work by 1 PM and finish after 3 PM).
Under a flexible work schedule system, a company normally sets contractual work hours per day and employees start their work at a time of their choosing. For example, if a company requires its employees to work 8 hours a day, it does not matter whether they arrive at 10 AM or at 1PM, but they must work for 8 hours. That is, employees can finish depending on when they start (If an employee arrives at work at 10 AM, the earliest an employee can finish work is at 7 PM).
Introducing such a system
Introducing a selective work hour system requires the existence of certain conditions and procedures defined in the Labor Standards Act. First, companies must have a clause in the Rules of Employment explaining that workers may decide their own start and finish times for work. According to the current law, employers who employ 10 or more workers shall prepare Rules of Employment. The beginning and ending time of work must be stipulated in the rules.
Stipulating that workers can decide their own start and finish times for work in the Rules of Employment is a prerequisite to introducing a selective work hour system. If the Rules of Employment do not include such a clause, the Rules must be revised. The Labor Standards Act indicates that with regard to preparation or alteration of those Rules, employers must listen to the opinions of a trade union composed of a majority of workers in the business or workplace concerned, or hear the opinion of a majority of said workers if there is no trade union composed of a majority of workers. If the alteration leads to unfavorable changes for workers, the employer shall obtain their prior consent.
Changes are determined as favorable or unfavorable by the overall advantage or disadvantage from the alteration. If a company set 9 AM to 6 PM as its working hours and decides to adopt a selective work hour system, it is unlikely the change would be seen as unfavorable. Maintaining the existing prescribed work hours and wages (without any change to the average monthly prescribed work hours and wages), and giving workers the right to choose their work hours would not lead to any disadvantage.
When overtime work which has been done in practice is reduced, the amount paid for that overtime is reduced. A small decrease in employees’ total wage is possible. Nevertheless, this change is not unfavorable for workers considering that the total hours of work has decreased with the decreased extended work, and wages for prescribed work (monthly wage in general) remains the same. Therefore, companies can revise their Rules of Employment after hearing the opinions of a trade union composed of a majority of workers, or hear the opinions of a majority of said workers, if there are no extraneous circumstances.
After making an applicable provision in the Rules of Employment, companies need to conclude a written agreement with a worker representative regarding specific setup of the selective work hour system.
Although setting periods for core time and selective work time is not an obligation, it is still very helpful to have one. One advantage of setting these periods is that companies can use core time for meetings, while one disadvantage is that companies should keep their offices open 24/7.
On the other hand, companies should consider the general principles on establishment and amendment of terms and conditions of employment for adopting a flexible work schedule since the law does not define that schedule. For workplaces without Rules of Employment (workplaces with fewer than 10 employees are exempted from establishing them), a flexible work schedule can be adopted through agreements with individual employees.
For workplaces with Rules of Employment, adopting a flexible work schedule also requires an amendment of the rules like creation of a selective work hour system. Such a schedule will generally not be considered an unfavorable change since it gives workers the right to decide their working hours. Companies can revise the Rules of Employment after hearing the opinions of a trade union composed of a majority of workers, or otherwise hear the opinions of a majority of said workers, barring any extraneous circumstances.
If a workplace defines the hours of work in its collective agreement, then it can go through the procedures to amend the collective agreement.
Issues with payment for extended, night and holiday work
Under a selective work hour system, working more than 8 hours on a certain day or working more than 40 hours in a certain week is not considered extended work. Extended work hours are hours worked beyond the total hours of work per unit period as defined by a written agreement between labor and management. In addition to ordinary wages, companies must pay 50 percent more for those extended hours. The actual hours of extended work are calculated after the unit period, and cannot be calculated by the day or week. However, companies should make payment for night work if a worker works between 10 pm and 6 am of the next day, and for holiday work if a worker works during a holiday.
Since there are no additional provisions for flexible work schedules, provisions in the Labor Standard Act regarding work hours apply. Therefore, companies must pay (50% of ordinary wage) for hours worked beyond 8 hours per day or 40 hours per week. Night and holiday work also requires additional pay.
An increasing number of companies are adopting different types of flexible work systems, as the idea is spreading that employee creativity equals competitiveness. Flexible work systems have been applied mostly in the research and development industry so far, but other industries are expected to join. Work hour systems in the past paid more attention to filling up the work hours, but the system will change in the direction of enhancing the abilities of individual workers and business efficiency. It is time to actively adopt flexible work hours according to company circumstances.