As the Ministry of Employment and Labor (MOEL) pushes to amend the Labor Standards Act centered on introducing the so-called "presumption of employee" system, concerns are growing in the retail sector about side effects such as higher labor costs and reduced hiring.
If delivery riders, part-time workers, and freelance personnel are recognized as employees, changes in the overall expense structure and staffing methods of the retail industry will be unavoidable.
According to the Ministry of Employment and Labor (MOEL) and others on the 25th, legislation to amend the Labor Standards Act with the introduction of the presumption of employee system as a key component is being pursued. Under the presumption system, once the fact of providing labor is confirmed, the person is presumed to be an employee, and if the employer fails to prove that the person is not an employee, the person is recognized as an employee. Under current law, employees must directly prove the fact that they provided labor.
If the system is implemented, various types of workers such as delivery riders, convenience store part-timers, and freelance personnel will be able to receive protections under the Labor Standards Act, including the minimum wage, the 52-hour workweek, severance pay, weekly holiday allowances, and the four major social insurance programs. The government said that even if someone is not ultimately recognized as an employee, it will strengthen rights protection through the Basic Act on the Rights of Working People, which will be legislated together.
The retail industry worries that if the scope of the Labor Standards Act's application is expanded amid an already deteriorating business environment due to minimum wage hikes and weak consumption from the recent economic slowdown, the burden of labor costs will increase. In particular, given the retail structure of convenience stores, delivery, logistics, and platforms where labor costs account for a high share, some analyses say the impact on small and micro businesses will be significant.
Potential on-the-ground confusion is also being raised. In the delivery sector, issues such as how to apply the minimum wage to riders whose revenue per order differs and which company to view as the employer for riders working across multiple platforms must be considered. A delivery platform official said, "Although a specific bill has not yet been released, we are concerned that if the presumption of employee system is introduced, the industry will contract and jobs will decrease," and added, "If the bill is applied, an increase in delivery expenses seems inevitable, in which case the expense will be passed on not only to corporations but also to self-employed business owners and consumers."
The restaurant franchise industry is also closely watching the impact of introducing the presumption of employee system. Because many part-time and short-term staff working at franchisees are operated under flexible employment formats, if the scope of presumed employees expands, the burden of labor costs could concentrate on franchise owners. Particularly as headquarters increase on-site involvement through manuals, training, and operating guidelines, if problems arise, disputes over employer responsibility could occur. Some say that if the higher labor cost burden leads to worsening franchisee profitability, it could result in reduced late-night operations or staff cuts.
A franchise industry official said, "From the perspective of corporations, we are concerned about expanded liability, but franchise owners' burdens will also grow," and added, "Some stores may reduce operating hours or close due to the expense burden."
The retail industry agrees with the policy's intent of protecting employees, but argues that phased application reflecting industry characteristics and clear standards are needed. The Ministry of Employment and Labor (MOEL) plans to hold expert forums and stakeholder meetings with a goal of legislating in May.
Lee Jong-u, a professor in the business administration department at Ajou University, said, "A platform's strength is that it is connected to many riders, but if fixed expenses increase due to the presumption of employee system, the number of riders could decrease and the strengths of platform corporations could fade," and added, "It will also affect labor disputes, increasing corporations' social expenses. The arithmetic for corporations will become more complicated."