On 22 January, the MOEL announced final versions of what are being called ‘Two Major Guidelines’ on easing of requirements for unfavorable changes to the rules of employment and general dismissals of low-performing workers. These guidelines form a major part of the planned labor reforms.
1. Guidelines on Fair Personnel Management
○ Poor performance due to a lack of ability to properly carry out work duties is a reason for general dismissal (termination of employment contract), but justifiable causes are required (Article 23 of the Labor Standards Act).
– A justifiable cause is the one that makes it, according to social norms, unacceptable to continue employment relations.
○ Determining the legitimacy of dismissals due to inability to perform work duties properly
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Reasons for dismissal (rules of employment, collective agreement) |
– If poor work performance is stipulated as a reason for dismissal in the regulations, such a dismissal is deemed legitimate. – Specifying the reasons for dismissal in the rules of employment is not an unfavorable change. |
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Evaluations (objective · fair) |
– Evaluation belongs to employer’s personnel management rights, which, however, shall not be abused. – How to evaluate should be decided based on job/roles. To improve objectivity, performance-based evaluations, absolute evaluations, evaluative measurements, and participation of employees (trade unions) in determining the criteria are recommended. – In case employees show low performance over a certain period of time, they can be selected for education & training. |
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Efforts to retain employment relationship (Education & training, reshuffling personnel) |
– Education & training program should be designed in a way to improve performance – Use such program should be used to improve organizational efficiency, not to dismiss employees. – Training for low-performing employees needs to be targeted and regularly monitored. Employees need to be encouraged through continuous feedback during training. – For experienced or specialized employees, it is possible to minimize the need to reshuffle personnel and the number of opportunities |
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Selecting workers for dismissal |
– Employees with no potential for improvement even after opportunities for improvement are given (eg. employees refusing to participate in training, receiving poor scores in training, and no improvement after back to work). – Employees who cause considerable disruption to work (more tolerance should be given to experienced employees coming from other companies) |
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2. Guidelines on Rules of Employment
○ Judging whether a change is unfavorable to employees by category of change
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Category 1 Wage peak systems |
– Unfavorable change – May be determined reasonable according to social norms in some circumstances. |
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Category 2 Reduction of working hours |
– Cutting wages due to reduced working hours is not an unfavorable change. |
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Category 3 Changing to job-based / performance-based wage systems |
(Principle) Changing payment method or wage systems are not unfavorable changes (Exception) If the change results in wage decrease to some employees, then it is an unfavorable change – If wage increase is guaranteed based on performance in the above case, it is deemed reasonable. |
○ Points to be considered when determining reasonable based on social norms (Judgment considers all 6 factors below)
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1. Degree of disadvantage to employees – Introduction of wage peak system after the existing retirement age: Accepted as reasonable if wage is not unreasonably lower – Introduction of wage peak system before the existing retirement age: Unfavorable if the amount of wage reduction is greater than the wage increase due to extension of retirement age
– The necessity to change rules of employment is accepted if wages are reduced to a reasonable level when taking into consideration the circumstances of individual companies.
– When determining appropriateness of employment rule changes, factors considered include interim measures, changes in the same industry, generally-accepted reasonable wage levels, and gradual reduction of wages
– Reduction of working hours, work adjustments, and expansion or retention of welfare benefits are taken into consideration.
– Acceptance is unlikely if an employer changes the rules of employment unilaterally or engages only in superficial consultations. – Trade unions refusing to bargain or consult without offering reasonable alternatives will increase likelihood of changes being determined as reasonable.
– The rate of wage reduction, supplementing or improving other working conditions or the current relevant working conditions, and negotiation and agreement trends in the same industry or region are taken into consideration. |