The Labor Standards Act was amended to allow a liberalization of the labor market and improve its flexibility as well as maintain the balance in the bargaining process between the management and labor.
It is expected that the amendments will be more efficient in terms of HR management, because it should improve the flexibility of the labor market, especially in terms of working hours and employment adjustment.

• Flexible working hours were introduced, which can be changed in units of two weeks or three months under certain conditions of the new law.
• That is, the selective working hours system determines only the total working hours within a period of one month, so that the worker can freely decide over when to start and stop working and on what day.
• A new system was implemented according to a written agreement between management and labor stating that specific working days can be replaced by annual and monthly leave.
• A flexible severance pay system was introduced, allowing for more flexible management and including a mid-term settlement of severance pay as well as the severance pay pension system. The mid-term settlement of severance pay is a system providing severance pay before retirement for the years of continuous work up to the day of the settlement. The pension system is a retirement insurance, which allows the worker to receive his severance pay as a bulk payment or in installments (as pension).
• The conditions and process of employment adjustment were clearly defined through the amendments of the Labor Standards Act in February 1998 and implemented immediately by abolishing the deferment period until March 1999. In order to prevent a deterioration of business, it was noted that consultation is needed in times of transfer, merger or acquisition or businesses in order to allow an active and smooth company restructuring.
Flexibility in HR management could be achieved through the utilization of outsourcing workforce.
The bargaining process between the labor and management could be improved by changing the existing system and abolishing irrational elements.
• Paying wages to a full-time unionist is an illegal action of the employer, however, the application of the new law is postponed for five years for those companies (the payment will be gradually reduced over the years and the reduced money used as a financial source for the union).
• The employer is not obligated to pay wages during the period of industrial action for the workers participating in the action, and it is not possible to engage in industrial action demanding wages for that period.
• The law prohibiting industrial action outside the business place was abolished and instead it is now prohibited to undertake industrial action in the major facilities for production etc. by obstructing the operation or entrance to those facilities or occupying them.

According to the present law, even a foreign-invested company with a foreign investment of 100% is. just like a Korean company, also eligible for government grants.

The general advantages and disadvantages are listed below, however, the actual advantages and disadvantages of establishing a factory in an industrial complex or another location vary for each company.

=> Several types of taxes and fees as described below have to be paid in order to
establish a corporation in Korea:

1. Registration Tax: 0.4% of paid-in-capital (in large cities often three-fold this amount)
2. Education Tax: 20% of the registration tax
3. City Railroad Public Bond: 0.1% of paid-in capital
4. Application Fee: KRW 5,000
5. Notarization Fee: around KRW150, 000 (for articles of incorporation, etc.)

=> Thus, for establishing a foreign-invested corporation with the minimum capital
requirement of KRW50 million, the total expenses would amount to KRW 935,000,
excluding the fee for the notary public.

A foreigner who has entered Korea with a D-8 visa has to go to the immigration office and get an alien registration ID within 90 days of entry. A foreigner with a short-term visa or no visa with approval to change the status must go to the immigration office immediately after entry to obtain the alien registration ID.

The floor-area ratio must not exceed the standards as described below (Art. 78 of the Act on the Utilization and Management of the National Territory):

– Exclusive residential area: type 1 (100%), type 2 (150%)
– General residential area: type 1 (200%), type 2 (250%), type 3 (300%)
– Commercial area: center (1,500%), general (1,300%), neighborhood (900%),
distribution (1,100%)
– Industrial area: private use (300%), general (350%), semi (400%)
– Green belt area: maintenance (80%), production (100%), nature (100%)
– Administrative area: maintenance (80%), production (80%), planning (100%)
– Natural environment area: 80%
– Development promotion area, natural park and park conservation area: 100%
– Marine conservation area: 80%
– Agriculture & industry complex: 150%

The assessment of impact on the environment is a process, which examines various business plans not only in terms of its economic and technological capabilities, but also regarding environmental elements and compares all these factors in a comprehensive perspective before making the final decision about the most appropriate business plan.
The assessment process is a preventive system for environmental pollution, which has the objective to create an environment-friendly and sustainable development, as well as to build and maintain a fresh environment. The projects subject to this assessment are as follows:

– Projects that are likely to damage the natural environment and ecosystems such as the
creation of country clubs;
– Projects taking place in environmentally-sensitive areas such as natural parks;
– Projects, for which environmental impact is difficult to predict due to the long-term and
complex nature of the effects through the construction of dams and land reclamation
projects;
– Projects creation of housing sites and industrial complexes.

The businesses subject to the assessment pursuant to the present Act on Assessment of Impacts of Works on Environment are 62 project units in 17 areas setting up tourist complexes above a certain size (refer to Appendix 1 of the Enforcement Decree of the Act on Assessment of Impacts of Works on Environment, Traffic, Disasters, etc.).
It is possible that the business itself acts as the proxy for filling out the documents for the assessment process by collecting the opinions of the citizens and relevant administrative authorities and requesting cooperation from the institutions in charge of the assessment (Ministry of Environment or local environment management agencies) after collecting the opinion of residents and relevant administrative organs. After the assessment, it is possible to execute the project, and after the project is completed the after-service is taken care of by the local environment management agencies.

Pursuant to Art. 23 of the Labor Standards Act, it stipulates that ‘the term of a labor contract shall not exceed one year, except in cases where there is no fixed term or where there is an otherwise fixed term as deemed necessary for the completion of a certain project.’

– A contract without a fixed term is permitted.
– If a term is fixed, the term cannot exceed one year.
– In exceptional cases, a contract exceeding one year is accepted, if the term is needed
to complete a certain project.

The term of employment concludes with the expiration of the contract. But if the worker has the intention of renewing the contract and if it became a usual practice and the employer has no specific reasons not to renew the contract, the renewal of the contract cannot be rejected.

An increase in discontent and demands by labor has emerged since the restructuring of businesses in 1998, when some labor unions were involved in illegal gatherings and strikes. However, since 2000, the number of illegal and violent strikes has drastically declined.
The government will ensure peaceful and legal gatherings by labor, but will take stern legal action against any behavior that goes against the law, uses force or leads to social disorder.
Therefore, continuous efforts will be made to discuss and persuade labor in order to achieve “cooperative labor-management relations”, which will support the development of the economy as well as bring stability to society.

A small-medium enterprise (SME) is defined by its number of permanent workers, assets, sales, etc. and by the specifications of its industry. If it meets the requirements and standards as stipulated in the Enforcement Decree of the Framework Act on Small and Medium Enterprises, it is eligible to receive benefits regarding the promotion of SMEs.
Requirements stipulated in the Enforcement Decree of the Framework Act on Small and Medium

However, exceptions are made in the following cases:
– Companies with over 1,000 permanent workers;
– Corporations with over KRW 500 billion in total assets (referring to the total assets in
the balance sheet of the last day
of the most recent business year) pursuant to Art. 2 of the Security Transactions Act.