Weekly holiday allowance system must be overhauled

In the aftermath of the recent 2.5% increase in South Korea’s hourly minimum wage for 2024, the business sector breathed a sigh of relief. The raise brought mixed feelings for the self-employed and small business owners at the forecast of the actual hourly wage crossing the 10,000 won mark when accounting for weekly holiday allowances. An 8-hour workday, five days a week, translates to a weekly wage of 473,280 won, the sum of the weekly wage of 394,400 won for a 40-hour workweek with a weekly holiday allowance of 78,880 won. This effectively sets the hourly wage at 11,832 won.

Dating back to the introduction of the Labor Standards Act in 1953, the concept of weekly holiday allowances aimed to safeguard the well-being of workers, initially facing grueling seven-day workweeks. These allowances ensured a reprieve by granting workers a day’s compensation for attending six work days. Over time, the framework evolved to accommodate the transition to a five-day workweek, extending entitlement to workers providing labor more than three hours a day for over 15 hours per week.

The issue emerged from the previous administration’s aggressive wage hikes to achieve a 10,000-won minimum wage. As minimum wages rose by 16.4% and 10.9% in 2018 and 2019, respectively, businesses responded by hiring two part-time workers for fewer than 15 hours each week instead of one worker for 30 hours, a tactic aimed at sidestepping weekly holiday allowances. This led to unintended outcomes, including reduced job stability, an upsurge in multi-jobbing, and a significant rise in workers logging under 15 hours a week from 960,000 in 2017 to 1,570,000 in 2022.

On the other hand, Japan already abandoned the weekly holiday allowance system three decades ago to better align with evolving work environments. A 2018 Korean Supreme Court ruling advocated excluding unworked weekly holiday hours from wage calculations. Nevertheless, mindful of labor sector opposition, the government has kept the outdated system intact through amendments to enforcement decrees.

Next year’s average nationwide minimum wage in Japan is 1002 Japanese yen, or 9224 won in Korean won. Despite Korea’s status as a barely emerging advanced economy, its minimum wage stands 7% higher, and 28% higher when factoring in weekly holiday allowances, which is excessive. With the 70-year-old weekly holiday allowance system increasingly proving counterproductive, the relevancy of the system, which causes only harm to job quality, remains highly questionable.