Ⅰ. Legal Standard Working Hours

Working hours refer to actual hours during which the employee provides labor service prescribed by the employment contract under the employer's direction and supervision. Article 50 of the Labor Standards Act regulates that working hours shall not exceed 8 hours per day and 40 hours per week, excluding recess hours. The employer shall pay an additional fifty percent (50%) of the ordinary wage for extended working hours exceeding the legal standard working hours. Working hours are usually implemented within contractual working hours that the employer and the employee have agreed upon, but there have been some disputes in recognizing working hours in cases where the employee conducted work before or after contractual working hours, or in cases of waiting time for work, training hours, traveling hours, company events, etc.

1. Concept of Legal Standard Working Hours
Working hours stipulated in the Labor Standards Act are regulated in units of one day and one week. The purposes for standard working hours are to allow recovery of the employee from mental and physical fatigue, preservation of labor service, and to guarantee the employee's right to participate in social and cultural activities.

Legal standard working hours regulated in the Labor Standards Act are as follows:



2. Calculating Contractual Working Hours

Contractual working hours are working hours within the legal standard working hours on which the employer and the employees have agreed. It is a concept mainly used to convert daily pay or monthly pay into hourly pay. Accordingly, the hourly ordinary wage is differentiated by contractual working hours. Contractual working hours determine the hourly ordinary wage, which is calculated by the day, week, or month, then divided by the working hours of the given period. Contractual hours also include the wages paid as an additional allowance for overtime work. They are the standard hours of payment for calculating wages.

1) In the case of a 5-day work week (8 hours daily) with one day of paid leave and one day of unpaid leave


2) Contractual working hours for employees between the ages of 15 and 18 years (in cases where there are no regulations provided by the company)


Ⅱ. Contractual Working Hours and Inclusive Wage Systems

1. Introduction

When the Labor Standards Act (LSA) is revised, related rulings also change. A representative example is changes to the Supreme Court ruling in relation to the inclusive wage system as contractual working hours are introduced as mandatory items in employment contracts. Prior to July 1, 2007, the LSA stipulated wages, working hours and other working conditions acceptable for employment contracts, but since that date, it now stipulates wages, contractual working hours, statutory holidays, statutory leave and other working conditions. This means that a previous employment contract that specifies only "working hours" remains unclear in content, but the revised law stipulates that it should include "contractual working hours." Contractual working hours refer to the time set by the employer that the employee is to work, within the allowable total working time (40 hours per week, 8 hours per day) (Article 2, paragraph 8 of the LSA). Therefore, since the revision, the wage in accordance with the contractual working hours has to be specified, which in effect limits the inclusive wage system.



In order to understand the content of such changes, it is necessary to examine specifically the meaning of the contractual working hours introduced with revision of the Labor Standards Act in 2007. In this regard, I would like to discuss the judicial precedents introduced due to the revised law, and then look into the types of suitable employment contract where an inclusive wage system is justifiable.
2. Contractual Working Hours
(1) Regulations on contractual working hours
Contractual working hours shall be determined between the worker and employer in the range of working hours pursuant to Article 50 (Work Hours) and Article 69 (Work Hours for Minors) of the Labor Standards Act, or Article 139 (Hazardous and Dangerous Work) of the Occupational Safety and Health Act. This means that contractual working hours must be set within the statutory working hours. Article 17 of the Labor Standards Act requires wages, contractual working hours and other working conditions to be specified in the process of making an employment contract. Therefore, wages defined in the employment contract are limited to 40 hours a week, and in principle, inclusive wages are a violation of the Labor Standards Act. Article 58 stipulates that if a worker is unable to calculate working time by working all or part of the working hours outside the workplace due to business trips or other reasons, he/she shall be deemed to have worked the contractual working hours. Even for part-time workers, "the employer shall obtain the consent of the employee concerned if they have a part-time worker work beyond the contractual working hours prescribed in Article 2 of the Labor Standards Act. In this case, such employee cannot work more than 12 hours a week beyond contractual working hours. The employer shall pay the part-time worker an additional 50% or more of the ordinary wage for the overtime exceeding the contractual working hours" (Article 6 of the Act on the Protection Etc. of Fixed-term and Part-time Employees). In the past, overtime pay was introduced only for working hours exceeding legal standard working hours. However, for part-time workers, the overtime pay shall be paid if the working hours exceed contractual working hours. This means that if the part-time worker has 20 contractual working hours per week, an additional wage shall be paid for the hours exceeding those 20 contractual working hours.

(2) Reasons for limiting work hours
Contractual working hours refer to the time within the legal standard working hours that the worker has to work. Here, legal standard working hours generally refer to 40 hours per week and 8 hours per day. The 12-hour limitation on extended work is for hours in excess of statutory working hours (Article 53 of the LSA). Overtime work for part-time workers is also recognized within a limit of 12 hours beyond the weekly contractual working hours of part-time workers. That is, extended hours for part-time workers are judged based on contractual working hours rather than legal standard working hours (Article 6 of the Act on the Protection Etc. of Fixed-term and Part-time Employees). In Article 17 of the LSA, stipulating the contractual working hours in the employment contract is mandatory, and then based upon this, wages and contractual working hours are determined. This limits the maximum working hours and ensures the right of employees to protect their health and pursue happiness
The inclusive wage system refers to a wage system that does not calculate basic wages in advance for a given working time, but rather stipulates that daily or monthly wages shall include the total amount of statutory working hours plus additional working hours. Since the LSA stipulates that basic wages and contractual working hours shall be defined in the employment contract, inclusive wage systems are, in effect, in violation of that Act.

Ⅲ. Additional Allowances and Limitations on Application



1. Overtime Work and Additional Allowances
Overtime work refers to working hours that exceed the standard working hours specified in the Labor Standards Act. Adult employees may work up to 12 extended hours per week through mutual agreement of the parties concerned (with no limit on daily working hours). Employers shall pay an additional 50% of ordinary wages for overtime work, night work, and off-day work. The additional pay shall be made for the employee's overtime work after calculating it into his/her ordinary wages. In cases where contractual working hours (e.g., 4 hours per day) in the collective agreement or rules of employment are less than the legal standard working hours, an additional allowance needs to be paid for extended working hours exceeding the contractual working hours regardless of whether they exceed the legal standard working hours. In this case, if the part-time employee worked for 8 hours, the employer shall pay the basic pay for four hours and the overtime work allowance for 6 hours: for 4 hours extended work and an additional 2 hours overtime, which will be 10 hours’ wage in total.

2. Night Work and Additional Allowances
Night working hours range from 10 pm to 6 am the following day. Employers shall pay an additional 50% of ordinary wages for night work. Regardless of working hours within the contractual working hours, pay for night work shall be paid separately as an additional allowance. In cases where overtime work, off-day work, and night work overlap, an additional allowance shall be paid for each. For employees to whom Article 63 of the Labor Standards Act (exceptions may apply) apply, an additional allowance will not be paid for overtime work and off-day work, but only for night work.

3. Holiday Work and Additional Allowance
Employers shall pay an additional 50% of ordinary wages for holiday work. 150% of the ordinary wage shall be paid up to 8 hours of holiday work, , and 200% shall be paid for hours of holiday work over 8 hours. This means that when overtime work and holiday work overlap, the employer shall pay each additional allowance.

4. Limitations on Application: Employees at Workplaces Ordinarily Employing Fewer than Five People
Some workers have limits to the protection offered. The representative example includes workers at workplaces ordinarily employing fewer than five people. The Labor Standards Act (LSA) stipulates that “The Labor Standards Act shall apply to all businesses or workplaces in which five or more workers are ordinarily employed” (Article 11).
In relation to such limitations on application of the Labor Standards Act, some problems have recently emerged. While labor rights are not completely applicable to people employed by workplaces ordinarily employing fewer than five people, they are now finding themselves eligible for severance pay, which in the past was not the case. This new situation has been at the heart of more labor disputes for those workers looking out for their own labor rights.
In December 2010, employees at workplaces employing fewer than five people became eligible for severance pay. This has brought a lot of attention to those workers in inferior situations. Major articles of the LSA that are not applicable to such workers include, among others, ① restrictions on dismissal, ② suspension allowances, ③ restrictions on extended work, ④ extended work, night work and holiday work, and ⑤ annual paid leave. Due to their exclusion from these protections, such employees often work in inferior working environments.

(1) Major articles applicable to workplaces ordinarily employing fewer than five people
Topics related to major articles applicable to workplaces ordinarily employing fewer than five people include, among others, ① written employment contracts, ② weekly holidays, ③ recesses, ④ accident compensation, ⑤ payment of money and valuables, ⑥ payment of wages, ⑦ restrictions on dismissal timing, ⑧ advance notice of dismissal, and ⑨ maternity leave.
Even though the restrictions on dismissal are not applicable, advance notice of dismissal is required, which means that an employer shall give at least thirty days’ advance notice to a worker the employer intends to dismiss. If notice is not given thirty days before the dismissal, ordinary wages of at least thirty days shall be paid to the worker. Most articles regarding wages to be paid for labor service are also applicable. That is, minimum wage applies, payment of wages shall be observed, and penal provisions for delayed payment of wages are applicable. Of particular note, severance pay became mandatory December 1, 2010: for the two years until December 1, 2012, employers had to pay 50% of full severance pay to resigning employees, which increased to 100% for periods beginning January 2013. Regardless of the length of service, severance pay only started accruing from December 1, 2010. Also, according to Industrial Accident Compensation Insurance requirements, accident compensation for occupational injury, including medical treatment, suspension compensation, handicap compensation, etc. are applicable in the same way as for regular employees.

(2) Major articles not applicable to workplaces ordinarily employing fewer than five people
As the following LSA provisions do not apply to workers at workplaces ordinarily employing fewer than five people, working conditions for such employees are quite inferior.
1) Restrictions on dismissal, etc., a) Employers can still dismiss or discipline workers without justifiable reason; b) Even though a worker is unfairly dismissed, the worker cannot apply to the Labor Relations Commission for remedy; c) An employer does not have to notify workers in writing of reasons for dismissal; d) As the restrictions on dismissal for managerial reasons do not apply to such workers, an employer can dismiss workers at any time if business conditions deteriorate; e) The two-year limitation on the use of temporary workers such as dispatch employees or short-term contract workers does not apply, and the employer can dismiss such workers at any time.
2) Allowances during suspension of business: When an employer suspends business operations, the workers cannot receive suspension allowances, even if business operations are suspended for reasons attributable to the employer.
3) Restrictions on working hours: Workplaces ordinarily employing fewer than five people do not have to follow the 40 hours per week limitation or keep to a 5 day workweek. There are no restrictions on extending the work day beyond 8 hours, or even beyond 12 hours, nor does he/she have to pay additional allowances (50%) for overtime, night shift (10 pm to 6 am) or holiday work.
4) Annual paid leave: When a worker at a workplace employing at least five people has worked continuously for one year, 15 days of annual paid leave are granted, but workers at workplaces ordinarily employing fewer than five people are not guaranteed any paid, non-statutory holidays. A worker at such workplaces must get permission to take a day off, and the employer can deduct one day’s salary.