1. Government held ministerial meeting and announced direction of 2016 economic policies
On 16 December the government held a ministerial meeting of economy and announced 2016 economic policy directions. The policies the government plans to push forward include financial and currency policies to strengthen the economy by boosting domestic demand.
The government plans to complete major reforms in the four areas of public institutes·labor·education and finance in the third year of a three-year plan for economic innovation. In particular, it plans to implement follow-up measures of the Tripartite Grand Bargaining through 5 labor reform bills (by the end of 2015), 2 guidelines on general dismissals & employment rules, and improvement of labor contracts. The government also plans to push ahead with legislation of the Special Act on Enhancing Corporate Vitality and extension of the Corporate Restructuring Promotion Act to boost the economy.
Besides, the government will develop liquidity improvement measures to support restructuring of enterprises and designate industries with employment crises as the ones of special employment assistance. Other plans include clarifying that whether a company goes on restructuring can’t be a reason of industrial action during the mediation of the Labor Relations Commission.
[Table 1] Summary of 2016 Economic Policy Direction
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▶ Clarify requirements for managerial dismissal (specify efforts to avoid dismissal, expand application of preferential re-employment) ▶ Strengthen guidance to prevent illegal industrial action in relation with corporate restructuring Adjust the scope of minimum wage calculation (accommodation, etc.), and differentiate application by region·industries and workers under 15 years old ▶ Restructure wage systems towards performance-based ones in civil servants and public institutions ▶ Strengthen guidance and supervision against discrimination in welfare benefits of non-regular workers (even if there are no comparative workers) ▶ Alleviate requirements for national pension subscription in workplaces (currently 60 hours per month) ▶ Strengthen labor inspection in support of parental leave: immediate sanctions against unfair dismissals of employees for using the leave, and against companies failing to permit parental leave ▶ Strengthen incentives to reduce working hours for infant care in terms of the number of use, length of period, and paternity leave months. |
2. Wage peak systems introduced at all public institutions: 82.9% wages in the first year of retirement age extension
According to the Ministry of Strategy & Finance (MOSF), “by 3 December, all but 3 of the 313 public institutions have introduced wage peak systems.” This is earlier than the target period of December-end due to a policy decision to cut wages at public institutions without the systems. With these systems in place, public institutions can hire 4,441 more people in 2016.
A wage peak system aims to increase job security for older employees through a gradual reduction of wages after a certain age and will be introduced as the retirement age is extended by law to 60 in 2016. The government plans to use the savings to hire new people at each public institution in accordance with recruiting goals. If a public institution is unable to achieve the recruiting target, it may face budget cuts as a penalty.
Adjustment of wages at public institutions with wage peak systems occurs for a period of 2.5 years on average. Wages during the first year after extending the retirement shall be 82.9% of the previous year, 76.8% in the second year, and 70.2% in the third year. The MOSF predicts that introduction of wage peak systems in 2016 will result in 18,000 new employees being hired, which includes the aforementioned 4,441. This is an increase of 4.5% over 2015 and the most number in the recent 3 years (17,856 people in 2014, 17,672 people in 2015).
An MOSF spokesperson was quoted as saying “we are planning to check whether public institutions develop appropriate jobs for those falling under the wage peak system, build a system to evaluate suitability, and hire new employees […] We expect wage peak systems that were first introduced at public institutions to be adopted and expanded in the private sector as well.”
3. Difficulties in discussions on labor market reform legislation in the National Assembly’s Environment & Labor Committee
The National Assembly opened a provisional session in order to pass the 5 labor reform bills. The Environmental & Labor Committee (ELC) in the National Assembly had discussion in the subcommittee for legislative review, which met on 15, 16 and 23 December to discuss the 5 labor reform bills: the Industrial Accident Compensation Insurance Act, the Employment Insurance Act, the Act on the Protection, Etc. of Fixed-term and Part-time workers, and the Act on the Protection, Etc. of Temporary Agency Workers.
*Provisional session of the National Assembly is from 10 December 2015 to 8 January 2016.
However, no agreement was reached on the Industrial Accident Compensation Insurance Act due to the different views on including commuting accidents as occupational accidents and the scope. No agreement was reached for the Employment Insurance Act either, due to differences on the amount of and requirements for unemployment benefits. The Act on the Protection, Etc. of Fixed-term and Part-time workers, and the Act on the Protection, Etc. of Temporary Agency Workers were not discussed in enough depth to move on, so decisions were postponed until after further discussion.