President Lee’s labour agenda: Key policy changes ahead

At a glance

• Major labour reforms are expected under President Lee Jae-myung, focusing on improving workers’ rights and conditions.
• Working hours will be reduced, with support for a 4.5-day workweek and better access to paid leave.
• Wage and employment systems will be overhauled, including banning fixed-salary schemes that bypass overtime and enforcing equal pay for equal work.
• Stronger union and collective bargaining rights will be introduced, including industry-wide agreements and protections for subcontractor workers.
• Small businesses and older workers will see changes too, with labour laws extended to very small firms and the retirement age gradually raised to 65.

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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.

With Democratic Party candidate Lee Jae-myung’s victory in the 3 June Presidential Election, Korea is poised for a significant labour law transformation. His campaign promise of “respecting labour and guaranteeing workers’ rights” will reshape how businesses operate in Korea. We summarise below key labour policy changes that will be particularly relevant for multinational companies doing business in Korea.

Reduced working hours

President Lee aims to implement broad working hour-reduction measures. The administration plans to introduce support measures for companies adopting a 4.5-day workweek. During his campaign, President Lee emphasised that the goal is to reduce Korea’s average working hours below the OECD average whilst maintaining the same level of wages.

Repeal of comprehensive wage system

The comprehensive wage system is a wage calculation arrangement that many multinational companies use. This is typically implemented by adding a provision in the employment contract stating that the employee will receive a fixed amount as monthly salary and that such fixed amount will cover all or part of overtime, nighttime or holiday work performed by the employee. This has been the subject of debate for many years with criticism that the system allows 'unpaid' overtime work. President Lee’s pledges include explicitly prohibiting the comprehensive wage system and implementing a new requirement that would force employers to track employees’ working hours accurately (eg mandatory clock-in, clock-out).

Promotion of annual leave

To promote the use of annual leave, measures such as shortening the paid annual leave eligibility threshold from one year to six months of employment and an annual leave savings system to allow employees to carry over unused annual leave days may be introduced.

Extension of retirement age

The mandatory retirement age is expected to be gradually extended to 65 to align with the national pension eligibility age. Rather than pursuing concurrent wage system reforms to address labour cost concerns, the government will instead support voluntary labour-management agreements on improving wage structures and working conditions.

Extension of the Labour Standards Act to small businesses

The Labour Standards Act may expand to fully cover businesses with fewer than five employees, ending Korea’s long-standing exemption for small enterprises. This change could have sweeping implications for small businesses, as they would become subject to the same employee protection measures as larger companies, including having to meet the strict just cause standard for terminations, paying overtime premiums, granting paid annual leave, and offering holiday pay.

Enhanced union rights

President Lee’s flagship labour initiative centres on expanding collective bargaining rights through the controversial 'Yellow Envelope Act' – a legislation that has faced two presidential vetoes under the previous administration. This reform will allow subcontractor workers to negotiate directly with the contracting entity and significantly limit businesses’ ability to claim damages from strikes and other industrial actions (whether legal) and also other types of union activities.

Industry level bargaining

The area most emphasised by President Lee in his policy pledges is the guarantee of workers’ rights and the expansion of the role of labour unions. His representative pledge in this regard is to promote industry level bargaining and we expect the administration to start with public sector industry-wide collective bargaining agreements before expanding to private enterprises. The administration will seek to expand the binding force of collective bargaining agreements by requiring that, even in cases where there is no collective agreement or an unfavourable one has been concluded, a collective bargaining agreement with equal conditions in the same industry, region, or sector will be applied, effectively standardising conditions across entire industries and regions.

Anti-discrimination: Equal work, equal pay

The principle of 'equal pay for equal work' may be legally codified with concrete enforcement mechanisms. Companies will be required to disclose wage distribution data, including job categories, ranks, tenure, and salary levels to enable a systematic monitoring of pay equity.

Employment equality wage disclosure requirements will mandate publication of gender employment ratios and their respective average wages. The administration plans to introduce a so-called 'employment insurance experience rating system' that increases unemployment insurance premiums for companies with an excessive number of terminations or non-regular employee hirings.

Conclusion and business implications

President Lee’s projected labour policies have the potential to reshape not only labour relations and market structures but also the business operating environment itself. While it is difficult to predict which policies will take priority, the political landscape suggests significant changes lie ahead.

With the Democratic Party holding 171 of 300 National Assembly seats until May 2028, President Lee may pursue these labour reforms during the first half of his term.

We will continue tracking policy developments and provide updates as these initiatives move from campaign pledges to concrete legislation or implemented policies.