At a glance
- From 1 January 2024, there are a variety of amendments to key labour and employment laws that companies should take note of.
- The minimum wage increases to KRW9,860 from January 2024, with bonuses now included in the calculation.
- Changes are being implemented to welfare and pension benefits as well as employment taxation.
- Updated requirements in relation to compulsory disability awareness training will be accompanied by reduced reporting requirements.
This article has been reproduced with the permission of the authors Weon Jung Kim, Ki Young Kim, Paul Cho and Hoin Lee at Kim & Chang.
The following are updates on amendments to key labour and employment laws that companies should take note of now and in 2024.
Minimum hourly wage for 2024
Under The Minimum Wage Act the minimum wage has been raised to KRW9,860 from 1 January 2024. This is an increase of KRW240 (approximately 2.5%) from the current 2023 rate.
The total amount of regular bonuses and cash welfare benefits will be included in the calculation of minimum wage. This is a result of the phased expansion of the application of such payments to the minimum wage calculation from 2019 to 2024 pursuant to the amendment of the Minimum Wage Act in 2019.
Strengthening employee welfare fund to reduce the welfare gap
Under Article 46 of the Enforcement Decree of the Framework Act on Labour Welfare from 1 January 2024, if a company uses contributions from the employee welfare fund for welfare projects related to subcontracted workers (subcontractor employees and dispatched workers) within the company’s fiscal year, the company can use such contributions up to 90% (currently 80%) of the total amount of the contributions.
If the employer’s employee welfare fund foundation supports the improvement of welfare benefits for subcontracted workers, the amount of the foundation’s basic assets that can be utilised will be reduced to KRW2 million or more (currently KRW3 million or more) per employee, the range of use of the foundation’s basic assets that can be used will be increased up to 30% of total basic assets regardless of disasters or business crises (currently 20%, but in case of disasters or business crises, 30%).
Abolishment of financial stabilisation plan for the Defined Benefit (DB) Pension Plan
According to Articles 7 and 33 of the Enforcement Decree of the Act on the Guarantee of the Employees’ Retirement Benefits, from 1 January 2024, the obligation to prepare, maintain and report a financial stabilisation plan will be abolished as the effectiveness of such plan, which was imposed on employers who did not meet the minimum accumulation ratio, has effectively been made moot as a result of the enactment of a provision that imposes an administrative fine of up to KRW 10 million for non-fulfilment of the minimum accumulation duty under the DB Pension Plan from 14 April 2022.
Additional contents required for disability awareness improvement training and mitigation of the reporting obligation
From 1 January 2024, under Articles 5-2 and 23 of the Enforcement Decree of the Employment Promotion and Vocational Rehabilitation of Disabled Persons Act, ‘respect for differences among disabilities’ will be added to the contents of disability awareness improvement training in the workplace, and the obligation for the employer to report its hiring plan regarding disabled workers will be reduced from twice a year to once a year (in January of each year) in order to mitigate the administrative investigation burden of companies obligated to employ the disabled.
Strengthening transparency of labour union financial information
When a union member of a labour union conducts an accounting audit of the union, his/her qualifications has been specified and such accounting auditor shall be a person who has experience in financial or accounting related affairs or has extensive expertise or experience. In addition, a certified public accountant who is not a union member can conduct an accounting audit of the labour union’s financials.
A representative of the labour union shall announce the results of the settlement of accounts and the status of operations on the labour union’s bulletin board within two months after the end of each fiscal year. In addition, the representative of the labour union or affiliated organization shall announce the above results through the public disclosure system by April 30th of each year.
This is effective as of 1 January 2024.
Raising the age of grandchildren who receive compensation pension for bereaved family members due to occupational accidents
From 8 February 2024, if a worker dies due to occupational accidents, the age of eligibility for his/her grandchildren to receive compensation pension for bereaved families will be raised from 19 to 25 years old.
Increasing the tax exemption limit for childcare allowances
As of 1 January 2024, under Article 12 of the Income Tax Act , the tax exemption limit for childcare allowances will be increased from KRW100,000 to KRW200,000 per month according to an amendment of the Income Tax Act.
Obligation to submit details of foreign stock-based compensation transactions
Pursuant to a provision newly enacted under the Income Tax Act to strengthen the identification of income, we note that, in case executives or employees of a domestic place of business of domestic or overseas corporations who receive stock-based compensation (such as stock options, bonuses paid in money equivalent to stock or stock value) from the foreign parent company (or the head office/branch/controlling shareholder, etc.), the domestic place of business to which such officer or employee belongs to must submit the following:
- details of the grant, exercise and payment of stock-based compensation;
- profits arising from such exercise and payment; and
- personal information of such executives or employee.
The submission deadline is 10 March of the year following the year of the taxable period in which the date of exercise or payment of stock-based compensation belongs. This provision will be effective as of 1 January 2024, and will be applied to those who have exercised or received stock-based compensation on or after 1 January 2024.
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