Battlelines drawn as S Korea plans to cut working hours

With the world's governments grappling for ways to add jobs and improve living standards, South Korea has made a novel proposal - cutting employees' working hours.

South Koreans are among the world's biggest workaholics, having put in an average of 2,092 work hours in 2012 - the third-longest in Organisation for Economic Co-operation and Development countries.

Korea has a statutory working week of 40 hours, but allows 12 hours of paid overtime on weekdays and 16 hours on weekends, as Koreans, dogged by spiralling household debt, chase bonuses and the chance of promotion.

Lawmakers are now seeking to shorten the country's working hours from the current maximum 68 a week to 52, part of President Park Geun-hye's pledge to boost the employment rate from 65 per cent to 70 per cent by 2017.

However, the move to wheel back on working hours has pitted trade unions against the country's business leaders, especially those in Korea's vital export sector where pressure on employees to put in extra hours is immense.

A pending bill, submitted by the ruling party last year, has become a political hot potato. Business leaders - worried about reduced output and higher labour costs - oppose the idea, while labour unions welcome it, but on the condition that pay is not cut.

"The proposed changes will no doubt result in disrupted production and added financial burden, not just for companies but for the whole economy," says Lee Hyung-joon, director at the Korea Employers Federation. He estimates that the higher rates of pay for holiday work would force companies to shoulder an extra Won7.6tn ($7.5bn) immediately and an additional Won1.9tn a year.

The supreme court is soon expected to rule on whether holiday work should be considered as overtime, in which case companies would need to double their pay for weekend work.

Mr Lee stresses that Korean workers should boost their poor productivity in order to justify being paid the same wage for fewer hours worked.

In 2012, Korea's labour productivity per hour worked was just 66 per cent of the OECD average and less than half that of the US, prompting some large businesses to take action.

Hyundai Motor has sharply reduced its working hours since introducing a new shift arrangement last year, but its productivity has increased thanks to investment in new facilities. Its labour union is now in talks with the company to cut working hours further as part of their annual collective wage negotiations.

But this is not feasible for many cash-strapped SMEs, which suffer from labour shortages and have no financial room for investment. "Many SMEs will be pushed to the limit if holiday work is not allowed," says Chun Hyun-ho, director at the Korea Federation of SMEs.

Mr Chun is demanding a grace period and a phased introduction of the new bill, while unions insist that the labour act, if amended, should be implemented immediately without lowering wages.

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For Mr Baek, a South Korean employee of an online storage service provider, a 12-hour workday is normal and weekend work is not unusual for little overtime pay. Once, at 10pm, his boss jokingly asked why he was leaving so early.

"It is tough, but what can you do about it?" he says. "You have no choice to make a living."

The gulf heralds tough collective wage negotiations for Korean companies this summer, at a time when they already face a handful of thorny labour issues including raising the retirement age, increasing minimum wages and including regular bonuses as base salary for calculating overtime and severance pay, which could sharply increase wage bills.

"It won't be so difficult to reach a wage deal for this year but all the other contentious policy issues will complicate the negotiations," says Park Sung-shik, spokesman for the Korea Confederation of Trade Unions, adding that the umbrella labour group is considering a collective strike in July to put pressure on companies.

Lee Ji-man, an economics professor at Yonsei University, is sceptical about the idea of creating jobs by reducing working hours, citing the country's lack of labour market flexibility. "Companies are unlikely to hire more people because it is so hard to lay them off when work volume falls," he says.

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