South Korea: new changes over Labour Standards Act
Regulatory update 3 minute read

South Korea: new changes over Labour Standards Act

27 July 2018

The South Korean government approved a bill amending the Labour Standards Act in February 2018 involving weekly working hours limit, annual leave and paid public holiday. Companies should learn about these changes to adjust their human resource policies accordingly.

Working long hours and not achieving a work-life balance seems to be a global issue many countries are trying to resolve, including South Korea. With the new changes in place, this could be a start for many South Koreans to adopt a healthier lifestyle. However, are businesses, especially foreign-owned companies, in South Korea ready for this?

If your company is still unclear about the changes to the Labour Standards Act, we have explained the main points below.

Shorter working hours in South Korea

As proposed by the government earlier this year, one of the main changes included the reduction of the maximum number of weekly working hours from 68 to 52. The lowered weekly working hours cap includes 40 regular working hours per week and a maximum of 12 overtime hours per week.

Prior to the revision, the limit was set at a maximum of 68 working hours per week, which includes eight hours for each non-working day (Saturday and Sunday), on top of the 40 regular working hours and 12 overtime hours a week.

However, it is important to note that there are different effective dates for this policy, depending on the size of your business, as listed below.

  • 1 July 2018 - Businesses with 300 or more employees
  • 1 January 2020 - Businesses with 50 to 299 employees
  • 1 July 2021 - Businesses with 49 or fewer employees

Following the amendments, industries that are exempt from the weekly working hours limit have been narrowed down to five:  land transportation (excluding bus companies), marine transportation, air transportation, other transportation services (such as parcel delivery) and healthcare industries. In spite of the exemption, the employers in these industries must provide at least 11 consecutive hours of rest to their employees before the next working day.

Prior to the proposed amendments, up to 25 industries exempt from the weekly working hours limit.

Holiday work allowance rate remains 150%

The existing pay calculation for holiday work allowance remains unchanged, and the calculation remains aligned with the revised Labour Standards Act. This means:

  • an employee who works for less than eight hours on a day-off or holiday is entitled to 150% of his/her ordinary-wage as holiday allowance;
  • an employee who works for more than eight hours is entitled to 200% of the ordinary wage instead.

Annual leave and paid public holidays in South Korea

The government has also made it compulsory for companies to provide up to 11 days of annual leave for their employees in their first year of service, and 15 days from second year onwards, starting from 29 May 2018.

In addition, it is a statutory requirement for companies in South Korea to provide paid public holiday entitlements to their employees. At the moment, the only statutory paid public holiday in the country is Labour Day.

This regulatory change will be effective from different dates, depending on the company’s size:

  • 1 January 2020 - companies with 300 or more workers
  • 1 January 2021 - companies with 20 to 299 workers
  • 1 January 2022 - companies with five to 19 workers

Talk To TMF Group

It can be both time-consuming and tricky for foreign companies to comply with the new regulations in South Korea. If your company needs help in adjusting to the Labour Standards Act post-revision, TMF South Korea has a team of experts with in-depth knowledge in human resource and payroll services to assist you so you can focus on your core business activities.

Want to know more about our services? Talk to us.

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Written by

Byung Jin Lee

Managing Director, TMF Korea
Byung Jin

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