With the inauguration of President Lee Jae-myung, South Korea enters a new era of labor and employment policies. The administration is expected to pursue substantive reforms aimed at strengthening worker protections, narrowing labor market disparities, and modernizing employment standards. Employers (especially those engaged in international business) should begin preparing for the impact these policy shifts may have on compliance, workforce strategy, and corporate governance. Some key areas where human resources are likely to be impacted include:

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Reduction of Standard Working Hours and Promotion of Flexible Work Arrangements

President Lee has previously endorsed a phased reduction of Korea’s statutory working hours from 40 to 36 hours per week, with a long-term goal of aligning national labor norms with OECD standards (~1,740 annual hours). Policies promoting work-life balance, such as expanded paid leave entitlements, are expected to receive legislative backing.

Implications for Employers:

• Employment contracts and work rules may require revision to reflect new hour standards.
• Businesses should assess staffing models to adapt to compressed workweeks.

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Expanded Protections for Non-Regular and Platform Workers

The new administration is expected to promote a comprehensive “Basic Law on the Rights of All Workers,” extending legal protections to freelancers, platform-based labor, and other categories traditionally excluded from Korea’s Labor Standards Act.

Implications for Employers:

• Employers will likely need to review and reclassify the employment status of contractors, part-time staff, and gig economy contributors.
• Worker agreements should be revised to reflect broader legal definitions of employee rights.

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Wage Equality and Adjustments to Retirement Age

Enforcement of “equal pay for equal work” principles are likely to intensify, with scrutiny on compensation disparities among workers performing equivalent roles. Additionally, Discussions on raising the statutory retirement age to 65 appear to be gaining traction.

Implications for Employers:

• Employers should reassess pay banding, incentive schemes, and promotion pathways to align with equity expectations.
• Workforce planning must re-evaluate career development and role transition strategies for older employees.

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Empowerment of Labor Unions

The new administration has expressed support for substantially enhancing collective bargaining rights, particularly for subcontracted workers. There may also be employment reforms towards industry-focused agreements, reshaping the landscape of labor-management relations.

Implications for Employers:

• Employers must invest in internal labor relations communication protocols and dispute resolution readiness.
• Proactive engagement with labor council is advised to ensure proactive compliance and negotiation support.

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Abolition of the Comprehensive Wage System

Among President Lee Jae-myung’s labor pledges is the elimination of the comprehensive wage system—a framework that allows employers to bundle multiple wage components (such as overtime, holiday pay, and bonuses) into a fixed salary. This system has faced criticism for obscuring actual working conditions and limiting fair compensation for excess hours.

Implications for Employers:

• Employers using comprehensive wage structures should prepare for a regulatory phase-out and consider transitioning to itemized, transparent wage practices.
• Payroll systems and employment agreements may require overhaul to ensure compliance with revised wage calculation standards.

Conclusion

President Lee Jae-myung’s labor and governance agenda marks a likely pivot toward employee-centered reforms and heightened regulatory accountability. While the administration has yet to definitively introduce a concrete agenda or official position on labor and employment matters, the direction seems clear. Employers are advised to take proactive steps—engaging with legal advisors, auditing internal policies, and preparing for structural shifts—to ensure resilience and legal compliance in the evolving Korean labor landscape. InterLEX stands ready to assist with all of your needs. As a premier law firm specializing in South Korean employment and corporate law, InterLEX provides tailored legal solutions to both domestic and international employers. With deep insight into Korean legislative trends and regulatory frameworks, InterLEX helps clients anticipate risk, implement strategic compliance, and align with the country’s shifting legal environment.

Supreme Court En Banc Panel to Decide Key Ordinary Wage Cases

The Korean Supreme Court is set to address a critical issue affecting wage calculations, as three high-profile cases involving ordinary wages have been referred to its en banc panel. These cases raise significant questions about whether regular bonuses with specific conditions qualify as part of ordinary wages.

SeAH Steel Case: The Service Condition Debate

The SeAH Steel case challenges whether regular bonuses that are subject to “service requirement clauses” should be classified as ordinary wages. Under these clauses, bonuses are only paid to employees still employed on the payment date, excluding those who have left the company.

The Seoul High Court Decision 2017Na2025282 Decided on December 18, 2018 had ruled that such clauses are invalid, stating that bonuses should count as ordinary wages because employees earn them by completing prescribed work, regardless of their employment status on the payment date. This ruling contradicted a 2013 Supreme Court en banc Decision 2012Da89399 Decided on December 18, 2013 which had upheld the validity of service requirements, sparking controversy among employers.The case was referred to the en banc panel in 2020 due to its potential to overturn established precedent, but no final ruling has been made.

Hanwha Life Insurance and Hyundai Motor Cases

Two more wage-related disputes joined the en banc docket recently.

• Hanwha Life Insurance: Similar to SeAH Steel, this case questions the validity of a service requirement for regular bonuses. The Seoul High Court Decision 2018Na2037060 Decided on June 19, 2020 previously ruled the clause invalid, finding that employees should not lose bonuses earned through completed work merely because they were no longer employed on the payment date.
• Hyundai Motor Company: This case involves a bonus eligibility condition based on the number of workdays completed. The Seoul Central Provincial Court Decision 2022Na75299 Decided on October 12, 2023 had found in favor of Hyundai, stating that the condition rendered the bonus uncertain and excluded it from ordinary wages.
  

Broader Implications

The Supreme Court’s en banc panel typically handles cases with major social or legal implications, and its ruling on these cases is highly anticipated. If the Court upholds the lower courts’ decisions, it could overturn the 2013 precedent, significantly impacting businesses that rely on service or workday conditions for bonus eligibility.

This comprehensive review is expected to clarify the status of conditional bonuses and provide a definitive stance on their treatment in wage disputes, with far-reaching consequences for employers and employees alike.

The Korean Supreme Court Decision 2023Da217312, Decided on July 11, has redefined the scope of “low-hours employees” under the Labor Standards Act. According to this Act, workers averaging under 15 hours per week over four weeks typically do not qualify for weekly paid days off or minimum annual leave. However, eight university lecturers challenged this rule, arguing that their work exceeded 15 hours per week when factoring in lecture preparation, grading, and administrative duties, even if their contracts stated otherwise.

While lower courts ruled in favor of the government, citing insufficient evidence that actual hours exceeded the contractual ones, the Supreme Court overturned these rulings. The Court found that preparation and administrative tasks are integral to lecturers’ duties, and basing “low-hours” classification solely on contracted lecture hours misrepresents their true workload. The Court argued that excluding these tasks contradicts the intent of the Labor Standards Act, which is meant to exempt only those with minimal work hours and lesser involvement.

This decision grants these lecturers the right to weekly paid days off and annual leave and may set a precedent for other part-time employees with similar roles. It suggests that even if contractual hours are below 15, jobs requiring substantial preparation or additional duties might still qualify for these entitlements. This could also extend to severance benefits, though that was not addressed directly in this ruling.