[Analysis] Labor reforms make it easier for companies to fire and change rules

Posted on : 2015-09-15 11:53 KST Modified on : 2019-10-19 20:29 KST
Changes made in the name of “flexibility”, but not yet clear if reforms will create more good jobs
 at their offices in Seoul
at their offices in Seoul

South Korean companies will at last be able to fire employees because of their performance and to change workplace regulations against their employees’ wishes. The government is also poised to push forward measures related to irregular workers such as increasing the employment period for short-term workers. The 18 million workers who are not members of labor unions – around 90% of the country’s workforce – are about to find their employment situation become even more precarious.

“The standards and procedure for reaching and terminating work contracts will be clarified according to law and precedent. In regard to reforming the wage system, including the introduction of a peak wage system, the conditions and procedure for revising collective agreements and workplace regulations will be clarified and this will be complied with,” said a tentative agreement reached on Sep. 13 by representatives of the Economic Social Development Commission, a tripartite negotiating body for labor, management and government. These passages refer to the requirements for changing workplace regulations and “regular termination” which refers to firing employees without financial or disciplinary reasons, both of which labor has fiercely opposed in the past.

To be sure, the draft of the agreement only talks about “clarifying” these regulations and says nothing about “relaxing” them. But the government and the business sector have long discussed “regular termination” in terms of under-performing workers, and it is inconceivable that the conditions and procedures will be strengthened.

In regard to the workplace regulations, the government has already announced that it plans to accept the validity of workplace regulations that are changed without the consent of the majority of workers or union members during the transition to a peak wage system and a wage system focused on job performance.

As if in recognition of this fact, the agreement says, “The government shall not implement these plans arbitrarily and will hold adequate deliberations with labor and management.” But this only mentions deliberations, not an agreement. If differences are not resolved after extended deliberations, there is nothing to stop the government from moving forward on its own.

This is even more worrisome considering the attitude of the government, which claimed the regular workers were overprotected and pushed ahead with discussions in the tripartite commission like a raging bull.

“This means that labor, management, and government

will deliberate until there is nothing more to deliberate,” Employment and Labor Minister Lee Ki-kweon told reporters at the government office in Sejong City on Sep. 14.

If the government makes it easier for companies to

change workplace rules and to fire under-performing employees, the workers who will face the greatest job insecurity will be irregular and non-unionized workers.

Most companies with unions have collective agreements, which are much stronger than workplace regulations. Thus, even if the workplace regulations are changed, workers can still be protected by the collective agreement. In addition, it’s not easy for an employer to willfully change workplace regulations in the face of union opposition.

At companies without a union, employees who are terminated do not have the power to contest their termination on equal terms with the company. Instead, they must file a complaint about unfair termination with the local labor board and engage in an exhausting legal battle with the company.

The rate of unionization in South Korea is 10.3%, the lowest among OECD member countries. Only 2% of irregular workers are unionized, meaning that only a small minority of irregular workers are able to negotiate on equal terms with their employers.

Considering that not only relaxing the requirements for revising workplace regulations and terminating low-performing employees but also comprehensive measures for irregular employees are on the table, this agreement could rightfully be called a program for increasing the flexibility of the labor market. What the government calls increased labor flexibility, however, means increased employment insecurity for workers.

In regard to proposals to expand the employment period for short-term and temp workers from two to four years, the agreement has a section titled “Employment Security and Rationalization of Regulations” that says, “A plan will be drafted through joint fact-finding studies involving interested parties and through soliciting the opinions of experts, and the points of agreement will be implemented after they have been made law through a regular session of the National Assembly.”

“We allow irregular employment in the interest of labor market flexibility, but we must stop companies from abusing irregular employment to cut labor costs,” Lee said during the press conference on Sep. 14.

Labor experts look back to the Asian Financial Crisis in 1998 - when financially struggling firms laid off workers en masse and brought on temp workers to replace them, leaving a major dent in employment security – and fear that the same measures will be used to undermine the employment security of individual workers today, 17 years later.

“The very fact that workplace regulations and regular termination were included in the agreement sends a big message to factories and the labor market. I’m very concerned that the management at non-unionized workplaces will be heavy-handed, claiming a mandate from society.

We could see a repeat of 1998, when the whole labor market was turned upside down,” said Lee Byeong-hun, professor at Chung-Ang University.

Discussion of restructuring the labor market is likely to take place in a variety of formats in the future – in the National Assembly, in the commission, and on the streets.

The ruling and opposition parties will clash in the National Assembly about legislation of the Labor Standards Act, and the Korean Confederation of Trade Unions (KCTU), which was absent from discussion in the tripartite commission, is expected to take to the streets. With the commission planning to push for a schedule, it seems unlikely that the Federation of Korean Trade Unions (FKTU) will have much of a voice in the commission.

By Jeon Jong-hwi, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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