President Lee Jae-myung recently reiterated his presidential campaign pledge to "fully reconsider the comprehensive wage system," bringing related bills back to the fore. The key issue is whether it will stop at mandating the recording of actual working hours to prevent abuse of the system, or lead to stringent regulations tantamount to a de facto ban.
◇ President Lee orders "stricter requirements for the comprehensive wage system"
Since his candidacy, President Lee has identified the comprehensive wage system as the fundamental cause of "long working hours" and "unpaid labor." Along with mandating the recording of actual working hours, he also pledged to ban the application of the system to industries and duties where working hours can be calculated.
This concern was reaffirmed at the Ministry of Employment and Labor (MOEL) work briefing on the 11th. President Lee said, "There is considerable criticism that the comprehensive wage system is being abused as a means of labor exploitation," and ordered, "Set out in detail the circumstances in which the comprehensive wage system is possible."
The comprehensive wage system is a method of calculating wages by including overtime, night, and holiday work allowances in the base salary in advance. Although it is not specified in the Labor Standards Act, it has been operated as a practice based on Supreme Court precedents. It was originally allowed as an exception only for certain jobs where it is difficult to calculate working hours, but in practice it is widely used by not a few corporations.
According to the "comprehensive wage system fact-finding survey" released by the Ministry of Employment and Labor (MOEL) in Oct. 2020, 37.7% of 2,522 business sites with 10 or more employees operated the system. Among office and managerial workers, 79.6% were found to be subject to the system.
◇ Codify a ban vs. allow exceptions with the Minister's approval
In line with President Lee's policy to "reconsider the comprehensive wage system," the National Assembly is expected to begin earnest discussions on reforming the system. In the 22nd National Assembly, partial amendments to the Labor Standards Act have been submitted by lawmakers Park Hae-chul, Park Hong-bae, Park Ju-min, and Lee Yong-woo (all Democratic Party of Korea), Jeong Hye-kyung (The Progressive Party), and Cheon Ha-ram (Reform Party), and are pending in the Climate, Energy, Environment and Labor Committee.
These bills commonly point out that the comprehensive wage system is being indiscriminately applied even to duties where working hours can be measured, entrenching long working hours. However, opinions diverge on whether to ban the system in principle or allow exceptions for certain industries.
The bills by lawmakers Park Ju-min, Park Hong-bae, Lee Yong-woo, and Jeong Hye-kyung would add Article 22-2 (Restriction or prohibition of comprehensive wage contracts) to the Labor Standards Act to, in principle, prohibit comprehensive wage contracts that pay allowances in a lump sum regardless of actual working hours. The bills by lawmakers Jeong Hye-kyung and Lee Yong-woo define not only fixed-salary and fixed-allowance schemes but also contracts that bundle unused annual leave allowances as comprehensive wages. Park Ju-min's bill also includes imposing fines for violations to ensure effectiveness.
By contrast, lawmaker Cheon Ha-ram's bill would, while prohibiting the comprehensive wage system in principle, exceptionally allow it for work where calculating working hours is objectively difficult, provided it passes the approval of the Minister of Employment and Labor and prior consultation with a workers' representative.
The implementation timing also differs by bill. Lawmaker Jeong Hye-kyung's bill provides for enforcement upon promulgation, while the bills by Park Hong-bae, Park Ju-min, and Lee Yong-woo provide for enforcement six months after promulgation. Cheon Ha-ram's bill would allow a grace period of up to one to three years.
◇ From recording working hours by day, week, and month to submitting them to the government
The proposed bills commonly strengthen obligations to measure and record working hours. They are described as safeguards to identify overtime and break the practice of long working hours.
Lawmaker Park Hong-bae's bill would add "actual number of working days and working hours" to the required entries in the wage ledger. The bills by Park Ju-min, Park Hae-chul, Lee Yong-woo, and Jeong Hye-kyung would require recording work start and end times by day, week, and month, significantly strengthening the obligation to manage working hours. The intent is to enable objective proof of working hours in the event of a dispute.
Of these, the bills by Park Hae-chul and Park Ju-min include provisions requiring reporting or submitting working-hour measurement records to the Minister of Employment and Labor. Park Hong-bae's bill grants workers the right to view the wage ledger, and Lee Yong-woo's bill guarantees the right to verify working-hour records and the right to file objections.
Meanwhile, there are no bills yet on the comprehensive wage system introduced by lawmakers from the People Power Party. They cite increased burdens on corporations and the potential for resulting wage cuts for workers if the system is abolished across the board. The People Power Party's position is that strengthening oversight to prevent misuse should take precedence over banning the system itself.