Gov't describes labor reforms it would like

Labor Minister Lee Jeong-shik annoucnes labor reform plan at the government complex in Sejong on Thursday. [YONHAP]

The government would like to see more flexibility in working hours and wages based on performance rather than seniority.

According to plans announced by the Employment and Labor Ministry on Thursday, one key proposed change is to allow employees to schedule overtime on a monthly basis rather than weekly.

The current 52-hour workweek law stipulates a 40-hour workweek with 12 hours of overtime allowed.

When managed on a monthly basis, workers would be able to work 60 hours in one week but far less in other weeks in the month, still complying with an average of 52-hours a week.

Manufacturers and particularly small and medium-sized companies (SMEs) have been requesting such flexibility, especially during peak seasons. Some say they had to turn away orders or hire more workers due to the restrictions on working hours.

Another major change the government is the adoption of seniority-based pay.

According to the government, 70.3 percent of companies with over 1,000 employees pay them based on the number of years they have worked at the company. For companies with 100 employees or more, the ratio is 55.5 percent.

An employee who has worked 30 years or more gets nearly three times they salary of a newcomer.

That’s higher than the 2.27 times difference in Japan and 1.65 times in Europe.

The ministry noted that such a system is appropriate in an economy that is expanding rapidly and needs to encourage employee on loyalty. But in a time of low-growth, when switching of jobs is common, that system is no longer sustainable, it said.

Additionally, the government plans to expand the peak-wage system to guarantee employment of older employees.

The peak-wage system limits the salaries of employees after a certain age. This system was adopted in order to reduce the labor costs of older employees and encouraging the hiring of young workers.

The government noted that by 2025, Korea’s population of people 65 or older will be 20.5 percent of the total population compared to 16.5 percent in 2021.

The Labor Ministry said it will create a research team in July that will come up with a new peak-wage system in October.

“While we are faced with various challenges,” said Lee Jeong-shik, Labor Minister, “we will establish a sustainable and future-oriented labor market.”

However, such changes require changes to laws and the Democratic Party (DP) has a super-majority in the National Assembly.

Such changes are also opposed by labor unions, a traditional base of the DP.

On Thursday, the Korean Confederation of Trade Union, the country’s largest labor group, released a statement criticizing the government’s labor reforms.

“The minister who himself noted that Korea’s average working hours are higher than the OECD average has introduced policies that extend working hours,” the union said.

During a Minimum Wage Commission meeting Wednesday, labor representatives asked for next year’s minimum wage to be increased 18.9 percent to 10,890 won.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]