The National Assembly has passed a revised bill to reduce standard weekly working hours from a maximum of 68 hours to 52 hours.
Under the revised Labor Standards Act, working hours per week will be limited to 40 hours of weekday work and 12 hours of overtime work. Working on a holiday or weekend is regarded as working overtime.
Overtime pay rates for working on a holiday are the same as at present: 150 percent of ordinary wages for up to 8 hours worked overtime and 200 percent for the portion over 8 hours.
Statutory paid holidays currently given to employees of the government and public institutions will be applied to private companies. Under the present law, only Sundays and Labor Day are paid holidays.
The number of industries not limited to standard working hours, that is, industries where effectively unlimited work is allowed, will be reduced from 26 to five.
The passage of the bill came five years after the parliament began debates on the revision of the Labor Standards Act in 2013. The revised act is a reasonable and realistic compromise reflecting demands of both labor and employers.
Though deals on overtime pay rates and the number of industries not subject to the workweek still remain controversial in labor circles, agreement between ruling and opposition parties could come because there were little differences in perceiving that Koreans’ working hours are too long.
A South Korean worked an average of 2,069 hours in 2016, 305 hours longer than the Organization for Economic Cooperation and Development average of 1,764 hours. South Koreans worked the second-longest hours among the OECD member countries. Only Mexicans worked longer than South Koreans.
Curtailment of working hours was one of President Moon Jae-in’s key campaign pledges to raise the quality of workers’ life. Few would dispute the need to cut down on working hours.
Still, shorter working hours can cause labor dissatisfaction over reduced overtime pay. They will also likely widen the gap between large and small companies in light of labor management.
Some large companies have reportedly rehearsed the reduced workweek, while small companies are ill-prepared. They fear shorter working hours will weaken their business conditions, as they are already struggling to cope with a sharp rise in the minimum wage.
With working hours reduced, companies cannot but hire more workers to maintain current production levels. There is a limit to raising the utilization of existing labor. On the side of employees, less working hours mean less pay. Employees should raise productivity to enable their companies to pay them the same as before when they are required to work shorter hours, but this is far from easy.
Labor circles demanded overtime pay at 200 percent of ordinary wages, but lawmakers bought employers’ argument that overtime pay will surge on labor’s demand. It is a realistic compromise.
Expansion of paid legal holidays to private companies will likely add to the burden on employers. According to the Korea Economic Research Institute, a 52-hour workweek is expected to cost companies additional 12.3 trillion won ($11.3 billion) to maintain the current level of production. About 70 percent of it is predicted to fall on small and mid-sized enterprises, particularly in manufacturing and transportation industries where overtime work on weekdays and holidays are frequent due to a shortage of labor. Under a 52-hour workweek, small and medium-sized companies are expected to fall 440,000 laborers short.
Cutting back on working hours is cited as one of three major burdens on businesses, along with ordinary and minimum wages.
The government must find ways to minimize production setbacks and labor cost increases stemming from reduced working hours. It must focus on complementary measures to ease burden on small and mid-sized businesses, among others. Taking the shorter workweek as an opportunity, the government needs work out steps to resolve a chronic shortage of labor in the service sector and small businesses where employees often work on holidays.
Reduction of working hours may be medicine or poison, depending on economic conditions.
The government must go out of its way to prevent reduced working hours from causing side effects as a stiff rise in the minimum wage did.