Changes to South Korean Labor Laws
The South Korean labor market features a highly-segments labor profile. Almost 20% of the labor force is self-employed, and another 21% consists of temporary workers. Thus the labor laws in South Korea are quite complex and include significant variables. Here we discuss the latest changes to South Korean Labor Laws in 2020.
Increase in Minimum Wage
Effective as of January 1, 2020, the minimum wage rate for all South Korean employees is KRW 8,590, equivalent to USD 7.20. The increment marks a total of 2.87% increase in the minimum wage rate from 2019.
As per the Enforcement Decree of the Minimum Wage Act, the increment is for all employees working in South Korea regardless of the industry they operate in. All employers must revise their employees’ salaries, whether temporary or permanent, as per the new amendment.
Among the changes to South Korean Labor Law in 2020, the government also made amendments to the calculation and taxation of retirement income. The multiplier in the calculation formula for retirement income has been reduced to 2% for all earnings from January 1, 2020, onwards.
Since this effectively reduced employee’s contribution to the retirement plan, their current wage and salary increased, which is subject to higher taxation. The government introduced the new amendment to create a progressive taxation system, and it also reduces the tax burden on retirees.
Bi-Annual Wage Subsidy
As per the South Korean Labor Law, low-income wage families are subject to receive a wage subsidy by the government annually. However, as per the latest amendments, they can now receive a subsidy twice a year via the Korean National Tax Services.
All low-income families aspiring to receive the subsidy must submit a Bi-annual Simplified Statement, including information about wage and salary income to the National Tax Service. To make the transition smoother, the government also extended the deadline for the submission of the statement for the first half of 2020.
Paternity Leaves Increment
As of January 1, 2020, a father can request 10 days of paid leaves within 90 days of their child’s birth, and the employer cannot refuse. They can opt to take all ten days off at once, or in two batches. The father can also request reduced working hours, and the employer cannot take any unfavorable action against the employee. However, the reduced working hours come with a relative salary adjustment to keep things fair.
52-hour Work Week for Almost All
The maximum working hours per week for employees in an organization with 300 permanent employees are 52 hours per week, as laid out by the Labor Standards Act 2018. The latest amendment to the Act now caps the maximum working hours to 52 hours per week for all employees in any organization with 50 permanent employees and above.
The latest changes to South Korean Labor Law in 2020 all focus on creating a favorable labor market for employees. The increase in the minimum wage and tax reduction, in particular, create some relief for the workers but also make operating in the South Korean market a little challenging for employers.
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