South Korea’s Labor Standards Act was amended in February 2018 to reduce the maximum weekly working hours to 52 from 68.
The reduced workweek came into force for companies with 300 or more employees in July last year. At the outset of this year, it was applied to small and medium-sized enterprises with 50 to 299 workers.
Violators of the revised workweek rules are subject to up to two years in prison or a fine of up to 20 million won ($17,630). The government has deferred the punishment until the end of this year, considering employers need more time to prepare for the implementation of the new rules.
The imposition of penalties was supposed to accompany measures to expand the flexible application of the rules, which already allow employers to adjust the maximum weekly working hours to 52 on average within a three-month period by having employees work longer during busy times and later go on deferred leave.
Government officials hope a bill to expand that period to six months will pass the parliament within its ongoing regular session, which ends in December.
But National Assembly deliberations on the bill have stalled, as the liberal ruling Democratic Party of Korea remains passive amid objections from labor organizations. Ruling party lawmakers have paid no attention to calls from the local business community to operate the flexible workweek system on a yearly basis.
The Ministry of Employment and Labor has said it will terminate the grace period as scheduled, meaning violators will incur punishment as soon as January, regardless of whether the parliament passes the bill on its flexible application.
This rigid stance concerns employers, particularly SME owners, who are afraid they might have to run the risk of being punished for violating the rules if the economy recovers from the novel coronavirus impact down the road, increasing demand for their products and services.
A thorough observation of the revised rules would result in a sharp increase in labor costs, weakening the price competitiveness of companies, particularly smaller manufacturing firms not prepared for automating production processes.
The negative effect of implementing the revised workweek scheme without expanding its flexible application could become more severe when it is applied to smaller firms hiring five to 49 workers in July next year.
There is no reason for the government to adhere to its plan to end the grace period, as the Assembly has still not acted on legislation to make the application of the workweek system more flexible.
The grace period needs to be extended by at least a year. Lawmakers should also be quick to pass the bill to allow the flexible workweek system to be run on a yearly basis as requested by businesses.
President Moon Jae-in needs to come forward to persuade ruling party legislators and labor groups to accept the more flexible application of the system.
Moon has vowed to turn the COVID-19 crisis into an opportunity to enhance the country’s economic vitality, setting forth a vision for Korea to take the initiative in the post-pandemic global economy on the back of its prowess in the sectors of information and communications technology and bio-health.
To achieve this ambitious vision, he has repeatedly pledged to push for what he described as the Korean version of the New Deal, which will focus on a future-oriented preemptive investment designed to establish digital infrastructure and create more jobs.
Easing the rigid workweek system is essential to carry forward the New Deal initiative. Held back by the inflexible system, local innovative businesses could hardly hope to realize their potential and move ahead of their competitors from other major advanced economies.
A more flexible workweek system is also needed to bring home Korean manufacturing firms running factories abroad. Most companies cite the shortened workweek and other excessive labor regulations as major factors that make them reluctant to return home. They are particularly concerned that such restrictions might make it difficult to deal with overseas orders by the delivery deadline.