Labor Law Q&A details

Chapter 2 Wages

Allowance during Business Suspensions

My company has been hit hard by Korea’s diplomatic friction with China, which I’ve heard has worsened the company’s financial situation. Suddenly, the company told all employees to take unpaid leave for one month. If I have no salary for a month, things will be difficult because I have no other source of income. What can I do?
Article 46 of the Labor Standards Act stipulates that when a business shuts down due to a cause attributable to the employer, he/she shall pay the workers concerned allowances of not less than 70 percent of their average wages during the period of shutdown. This is called a shutdown allowance. If the average wage of 70% exceeds the ordinary wage, the ordinary wage can be paid as shutdown allowance. This is to protect workers from the complete loss of wages if they cannot work for reasons outside their responsibility. However, this applies only to businesses or workplaces with 5 or more employees at all times.
Here, causes attributable to the employer are, in principle, management issues that are within the scope of the employer’s responsibility. This includes business shutdowns due to a shortage of funds, shortage of raw materials, a decrease in orders, market recessions and reduced production, or reduced operations caused by partner company material shortages or financial difficulties due to a parent company’s financial difficulty.
In the case mentioned in the question, a shutdown of the business for a month due to sales stagnation or financial difficulties is generally judged as attributable to the employer, so 70% of the average wage should be paid as a shutdown allowance.

For further questions, please
call (+82) 2-539-0098 or email bongsoo@k-labor.com

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