The personnel expenses issue is about to explode across industries. The revised Labor Standards Act for shorter working hours will pass the National Assembly this month, and employees are in negotiations with their employers to include bonuses into the ordinary wage. Those over the minimum wage are likely to go on for months from now as well.
The draft of the revision to the Labor Standards Act, which stipulates that holiday work is included in extended working hours while cutting the weekly working hours from 68 to 52, has come out into the open. The Tripartite Subcommittee of the National Assembly Environment and Labor Committee held a public hearing on April 9, and the participants had a fierce battle over the revised bill. The three parties agreed with one another on the reduction of working hours, but failed to reach a consensus when it came to specific measures.
Entrepreneurs are complaining over the double whammy of ordinary wage and sudden labor hour reductions. In response, the labor world is claiming that the cut is a matter of course, with Korean workers recording the longest working hours in the world.
According to the Korea Labor Institute, corporations have to burden immediate additional costs of at least 7.6 trillion won (US$7.3 billion) when the statutory working hours are decreased to 52. In addition, will they have to pay over 1 trillion won (US$960 million) each year in additional costs. In particular, small and mid-size enterprises, where overtime work is more frequent, have to shoulder approximately 5.0339 trillion won (US$4.8325 billion).
Another hot-button issue is the scope of ordinary wages, which has come to the surface since the recent Supreme Court Full Bench ruling that regular bonuses can be considered as a part of ordinary wages. The labor unions of Hyundai Motor Company and Kia Motors have already asked for the application of the ruling to wage negotiations and collective bargaining for this year, in confrontation with employers. Employers, on the other hand, are opposed to the sudden increase in overtime pay, severance pay, and employee benefits to be calculated based on the ordinary wage. The Korea Employers Federation (KEF) has recently warned that the inclusion of bonuses in the normal wage would lead to additional costs of 8.8 trillion won (US$8.4 billion) a year, which, in turn, would result in 96,000 fewer jobs on a yearly basis.
Labor and management are having disputes surrounding the retroactive application of the ruling, too. The former has issued a warning of a series of lawsuits along with the organization of a joint struggle committee. It is in this context that the ordinary wage suit filed in 2011 with the Seoul Central District Court by 27,000 union members of Kia Motors and a similar one raised early last year by dozens of Hyundai Motor labor union members have begun to show some progress.
Additionally, the Supreme Court ruling in favor of the payment of 200 percent of the normal wage for holiday work is scheduled to be handled after the parliamentary passage of the bill for reduced working hours. A number of lawsuits for retroactive application are foreseen, as with those over the normal wage.
Business Community Trying to Buy Time before Legislation
Corporate managers, in the meantime, have opted not to hurry over the bill, veering from their stance to amend the act through a tripartite agreement before the Supreme Court ruling. They are now trying to fix the overtime and holiday working hours based on a voluntary agreement between themselves and the labor sector, allowing for the situations of individual businesses. In short, they are taking a proactive stance focusing on autonomy rather than legal regulations. Still, the three-party dialogues for dealing with the major pending issues are slated to continue.
“The government and the political community are anticipating, ahead of the ruling, that the Supreme Court will include holiday work in extended hours,” said an anonymous source from an economic organization, adding, “They are forcing us to cooperate by means of the logic that early enactment is advantageous for the corporate sector.” The Supreme Court was going to deliver its ruling on the number of working hours earlier this year. However, it has postponed the judgment since the onset of the three-party talks. The question still under consideration is whether or not the maximum weekly working hours should be 68 – including 40 regular, 12 extended, and 16 holiday – or 52 hours excluding holidays.
“Many people say that the Supreme Court decision to include holiday work in the extended hours will lead immediately to the reduction of working hours to 52 but it is not true,” KEF Vice Chairman Kim Yeong-bae explained, continuing, “The decision overturns its own ruling delivered in 1991, which means a Full Bench consideration will be required as in the case of the ordinary wage issue.” This implies that management will turn to the Full Bench depending on the Supreme Court decision to stall for a year or so at the least. The Supreme Court accepted eight hours of holiday labor 23 years ago. The labor authorities came up with its administrative interpretation in 1993 on the basis of the decision, and it has been applied so far. However, the labor hour issue emerged again in 2012, when the Seoul High Court reached a conflicting verdict. The government selected a reduction of working hours as one of its most urgent national policy goals, and has hurried to revise the Labor Standards Act.
The business community agrees to the reduction of the maximum weekly working hours by 8 to sixty, but is calling for some adjustment in pace in view of the reality of the situation. “If we are compelled to comply with an act that we cannot abide by in practice, even greater chaos will follow in the form of production failures, unintended violations of law, successive lawsuits, and deteriorating labor-management relations,” said a human resources director of a leading business group. He added, “More and more economic organization members are pointing out nowadays that such a call from us is not reflected at all, as the law revision is accelerated by the political community.”
Under the circumstances, the KEF has recently sent companies directives for voluntary extended work based on labor-management agreements, a ban on income preservation for no holiday work, and payment of wages grounded on productivity. The idea is to let employees and employers decide labor hours on their own. At the same time, the organization is planning to increase part-time jobs and encourage workers to use their annual and monthly leaves more freely, in an effort to reduce real working hours.
“Many foreign governments are encouraging the work-life balance of their people by adopting flexible labor hours and allowing more types of work,” said KEF Senior Managing Director Lee Dong-eung, continuing, “What matters more than a uniform reduction is a legal system allowing flexible working hours.”
However, the labor community is strongly opposed to such arguments. “What the entrepreneurs are trying to do is turn the tables in favor of themselves by mentioning the Full Bench and stalling for time and this is just a shallow trick.” Federation of Korean Trade Unions Secretary General Lee Jeongshik criticized. He also said, “The Tripartite Subcommittee agreed back in 2010 to decrease the annual working hours to 1,800 by 2020, and it is totally absurd to say that more time is required for preparations.”
Korea has decreased its maximum legal working hours. Nevertheless, its real labor hours are second to none in the OECD, despite such consistent efforts. Employees in most of the member countries work less than 2,000 hours a year whereas paid employees in Korea worked 2,092 hours in 2012. Yet, the labor productivity of Korean workers is about half those of their US and German counterparts.