Most of the industrialized countries have a three-level social security system (government, company, and individual) regarding pensions. The severance pay system of Korea falls within the level of company pension.
The level of the Korean social security system is lower than those of the advanced industrialized countries. Also, an optional severance system will face strong opposition from the people and workers.
The contribution of the company for the legal severance payment is around 8.3%. And it is not the severance payment system per se that is a burden for the companies, but rather the system of the accumulated severance system which the labor and management agreed upon. However, this problem needs to be solved by the labor and management themselves.
The present severance pay system is not voluntarily implemented, but mid-term settlement and pension systems of severance pay were introduced to match the company’s actual conditions and minimize the burden, if managed efficiently.

A part-time worker refers to a worker, who is working less hours per week compared to full-time workers performing the same kind of work.The working conditions of the part-time workers have to be in proportion to the working hours of the full-time workers.

– Paid monthly and yearly leave has to be in proportion to the amount of leave granted to
the ordinary workers, and have to be granted in hours.
– Official public holidays, menstrual leave and maternity leave have to be the same as for
the full-time worker, and in this case, the wage has to be based on ordinary wages.

For part-time workers with less than 15 hours work per week in an average four weeks, it is not necessary to grant severance pay, main holidays, monthly leave and yearly leave.

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.

Pursuant to Art.10 of the Labor Standards Act, ‘This Act shall apply to all businesses or workplaces in which five or more workers are ordinarily employed.’ For businesses or workplaces that ordinarily employ less than four people, only some of the articles shall apply.

• The term “ordinarily employed” in this sense means that at least five employees must be continuously employed, and this criterion is to be evaluated objectively based on commonly accepted social standards.
• Businesses or workplaces that employ workers on a daily or temporary basis may be judged to have these workers included in the evaluation of having at least five workers ordinarily employed.
• Accordingly, even if the number of workers are at times less than five, such businesses will be subject to the Labor Standards Act when the number of workers is commonly considered to be five or more.

Social insurance is obligatory in Korea and includes national pension, health insurance, employment insurance, and accident compensation insurance.The cost of the insurance is divided between employer and employee according to the table below. In the case of employees, the share of the cost for the social insurance is deducted from wages..

The standard working hours of the workers include the official holidays, but not the main holidays.
If the wage is paid monthly, the main holidays are included in the wage. However, if the worker is paid by the hour or day, then the main holidays are not included, so that they have to be paid separately.

There is no relationship between employment succession and the change of the majority shareholder after selling stocks.However, if the change of the majority shareholder leads also to a change of the management, and the new management is considering a new business direction, then it might also have an impact on the employment of the workers.

– But in that case, it would be equal to a layoff, which would require a justifiable reason
pursuant to Art. 30 of the Labor Standards Act.

In this case, this cannot be called a business transfer and thus there is no obligation for employment succession.Therefore, an exact definition needs to be made, because the issue of employment succession will be decided depending on whether it is a transfer of “business” or a transfer of “assets”.

Employment succession in case of a business transfer depends on the contents of the contract, in which the rights and obligations are stipulated.

– If there is a clause in the contract referring to the issue of employment succession
between the transferor and transferee company, and that not all employees will be
transferred, then it is possible that part of the employment relationship will be
terminated.
However, such a clause has the notation of a dismissal, and in that case, a justifiable
reason is needed for a dismissal as stipulated in Art. 30 of the Labor Standards Act.

Thus, business transfer means a transfer of the whole personal or material system or organization by maintaining the same identity with a consistent goal.

An example of a statutory merger is the acquisition of a weak company B by a strong company A.If both companies go through a restructuring before the merger:

– In case of company A, it would be difficult to find a justifiable reason, since
restructuring would take place only on the assumption that a merger will take place in
the future. Therefore, compromise with the workers would be difficult and layoff of
personnel unacceptable;
– As a result, company B would have to dismiss workers due to deteriorating business
conditions and pursue an M&A after the layoff of workers.

If restructuring is implemented after the merger:

– After the merger, all workers are legally employees of company A and not company B,
so it is impossible to discriminate between the workers.
– Therefore, the criteria to layoff workers must also include workers of company A and in
this case, the workers of company A will anticipate the situation and be against the
merger in the first place.

In reality, it takes several months from the negotiations until the merger is completed and during that time, the plans for dealing with the worker problem will be subject to discussion.

– The plans about restructuring and layoff will be led by company A and discussed
between the management and labor union of company B and the labor union of
company A.
– Before the merger, both companies A and B will commence preparations concerning
restructuring. However, after the merger, company A will complete the process on a
legal basis.